How to Attract Higher-Paying Customers Through Your Pricing Strategy

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0:32I can't wait to see you there. Are you ready to increase your sales? Hey there, I'm Katie, president of Social Curator. And in today's episode, Jasmine is breaking down five different pricing strategies that will help you not only sell more of your product or service, but get this, attract higher paying customers. So grab your favorite notebook, close out those tabs, and get ready to learn how to maximize each and every sale. Now, here are five different psychological pricing strategies that you can use to help you get more sales. Now, y 'all know how we do with our frameworks here in the podcast.

1:04Before I dive into each one, I'm going to tell you what they are so that you can take notes. Strategy number one is the decoy effect. Strategy number two is odd versus even pricing. Strategy number three is bundling and adding bonuses. Strategy four is creating a sense of scarcity and urgency. Strategy number five is showing that your offer is in demand. And strategy number six is offering tiered pricing. Y 'all, you know how I do. You're going to hear examples. we're going to break this down because this podcast is about taking action. I don't want you listening. I don't want you watching and then being like, that was cool.

1:36No, no, no. Just one thing. One thing from every episode and you're going to end up a stronger entrepreneur, a stronger founder, a stronger business owner with a lot more confident, not because you know it all, but because you're taking small, tiny actions every single episode. Strategy number one, the decoy effect. Okay. I love this. Now I don't use it, but I love when I see it. And now you're going to start seeing it everywhere. So when you introduce an additional less attractive option, it can make the other options that you're putting out seem more appealing. Now this effect is usually used to highlight the value of a specific product or service.

2:13Okay. Let's get into an example. So I read a study. Starbucks wanted to sell more ventis. So they used this decoy strategy effect. So ventis, it's their large size, right? Starbucks is so fancy, they can't say large. They say venti. And they said, we want to sell more ventis. And this is how they do it. So they offer their 12 ounce drink. Let's just say their 12 ounce drink is$3.50. Their 16 ounce drink is$4. And their 20-ounce drink, that's their venti, is$4.50. Okay, now they introduced a larger size, the Trenta, which is a 31-ounce drink priced at$6. Now, they don't really want to sell more Trentas.

2:58They want to sell more ventis. The higher price point and the unnecessary amount of caffeine in the Trenta makes the The venti seemed like the biggest value and the best choice by placing it as a it's in the middle. It's not the most expensive. That's how they're positioning that option, even though the Trenta is technically the cheapest per ounce. So now let's take it back. We see Starbucks go from three options when psychology tells us that most often people feel comfortable choosing the middle option. So they were selling more of their medium, the grande. Is it the grande? Is that what the medium is?

3:37Anyways, we're gonna hold. Y 'all, you can tell I don't really drink Starbucks. The middle option, the medium. They were selling more of the medium. They said, how do we get more people to buy the large? Well, let's introduce the extra large so that the standard large looks more appealing. Y 'all, that is the decoy effect in full effect. Now take a look at your offerings. Do you have three tiers? Do you have three offers? is there any way that you can add a fourth to make a third option look more appealing? Okay, let's move on to strategy number two, odd versus even pricing. Y 'all, this is like classic pricing strategy 101.

4:14Prices ending in odd numbers, for example, 9.89, they're perceived as more affordable. And you're going to see a lot of the big box retailers like Target, Walmart, like you have like a ton of options when they really want to push a product, they'll simply at a 0.99. It's interesting. Now, on the other hand, prices ending in even numbers like$10 can be perceived as higher quality. Right? Crazy. Why? Even numbers often feel like a standard. So you're going to find this a lot in higher end designer stores. You're not going to walk into a high end designer store and see something for 0.99. You're not.

4:49So let's break this down with an example. Imagine you are shopping for a new pair of shoes and you come across two options. Now, the first pair is a pair of like running shoes and they're priced at$99.99. And the second pair is priced at$120. Now, the store owner strategically used odd pricing for the first pair of running shoes in two different ways. Number one, they set the price to end with a nine. Number two, with them being$99.99, they're perceived as more affordable due to them being under$100, even though the price difference is just one penny, right? This owner has a harder time selling a pair of shoes for$100 than he or she does selling that same pair of shoes for$99.99.

5:37Now, on the flip side, the shoes that cost an even$120, they're most likely statistically perceived as better quality and more high-end. Okay, but let's get into the psychology here. This is crazy. If I wanted to buy a pair of Nikes on a deep psychological level, I know that the Nikes are not all that different from each other. If I am comparing the$99.99 to$120, I know that there isn't some magical air in the$120 shoe. But the$120 shoe, well, surely it must be higher quality. Surely something must be different when it's not. It is psychological framing up of price differentiation using odd and even pricing.

6:30Now, let's think about what your offers are. How do you want to be positioned? How do you want your offer to look? we are in the process of putting out a very y 'all i keep on talking about it and i feel like i can't spill the tea but i will tell you that this offer is ending not in 99 cents but in 99 why it's a debut offer and the price will increase after a time period so what am i doing now i'm framing up the odd price so that it looks and appears like this thing is at a discounted rate. And in the future, I will use even pricing to anchor it. So let's go back to our strategies because I do a lot of like, I'm going off in different tangents and I want to make sense and follow along, make sure they're following along with the notes.

7:23Strategy number one was the decoy effect. Strategy number two was odd and even pricing. And now the third strategy is bundling and bonuses. Y 'all, this is my wheelhouse. Like I love this stuff. And it took me so long to actually understand how powerful it was. So when you bundle different products and services together, it creates a feeling. It creates a feeling. I want to pause there because we're talking about psychology is when you bundle things, it creates a feeling that your customers are getting more bang for their buck. Like the whole package seems way better than buying everything separately.

7:52And it's a really smart move that benefits both the businesses and the customers. Y 'all remember I to talk about that 5149. I love this. So imagine you're considering to sign up for a digital course. Option number one is a single course for$100. And option number two is a bundle of two related courses for$180. And option number three is a package with three courses, additional resources, and exclusive webinars for$220. Now, options two and three look like the best deals because they're getting more knowledge and resources for a price that's less than if they bought each course separately. It triggers FOMO.

8:33Okay. Now, when we talk about bundling, psychology states that people are more inclined to want to avoid the loss of something more than they're inclined to save money. So, you know, like this bundling, people often say, oh, well, people should bundle so that they save money. Yes, that's true. That does work. But the reason why bundling and bonuses work so well is people are psychologically more adverse to losing something. So now let's talk a little bit about bonuses because this plays into why somebody is going to buy immediately for fear of FOMO, fear of missing out. Offering something for free, no matter what the size, can trigger a psychological response known as loss aversion.

9:18People are more likely to make a purchase to avoid missing out on a free item, even if it's small. Okay. So back in 2016, I launched a course and it was an Instagram for business course. It was called Insta 180. And we launched Insta 180 and it did really well. I was really surprised. It was phenomenal. And then we launched it again about six or eight months later. When we decided to launch it for the third time, we were in the middle of the launch and I really wanted to make a splash, but people had already seen the offer and I wasn't sure how to talk about it differently that was going to drive things home.

9:53So I was having a conversation with my mentor, not about the launch. We were just having a conversation. And in the process of our conversation, he had said something, oh yeah, like, I wish you could just write that caption. I was like, oh sure. I'm like, I can write a caption. Like, look at how easy. I just have a hook, some insights, your call to action. What do you want them to do? There you go. And he's like, man, I wish you could, wait a minute, Jasmine, I wish you could write me a hundred captions. and then a light bulb went on over my head and I said I can write caption templates that could be customized for different business owners now this wasn't necessarily done for you but it was like a done with you and so with 48 hours left in the launch I stayed up you all like I stayed up so late I put together a pdf I wrote not 100 but 101 why psychology of pricing it was I wanted to end on an odd number.

10:46It wasn't 100, it was 101. And the bonus was called 101 Instagram caption templates. With less than 48 hours, I added the bonus. I went on my social platforms talking about this bonus and people wanted the bonus as much or more than they wanted the course itself. That was hands down the biggest launch that I had ever done for Insta 180, that Instagram for business course. Now I don't have that course anymore, but I look at that and it was like everything shifted in my perspective because I had experienced other launches where you make an offer and people were excited about it, but I had never made a offer with a bonus that was perceived as more or the same value as the course itself.

11:34And that's when I said, oh my gosh, every time I put something out, this bonus should drive as much value as the course itself or as much desire as the course itself. Because when people want to lock that thing in, they're just so much more closer, not just to closing the transaction, but to feel so good about that transaction. So I want to now move on over to the fourth pricing strategy, which is creating a sense of scarcity and urgency. Creating this loss, right? Everybody's like, oh, I'm going to be risk averse. When you can create a sense of urgency or scarcity, it encourages faster decision making.

12:13And as business owners, that's what we really want. It's the people who vacillate and take the longest. They have a tendency to be the most uncertain. They ask the most questions and become the most demanding. It's like, have you ever experienced when somebody comes in, they look at your offer like, boom, done, got it. this is what I want. And you're like, how do I get more of that? How do I attract more of that kind of customer? Now, I have noticed over time, and I've done this again and again and again, using limited time offers, low inventory alerts, price increases, disappearing bonuses, a limited amount of seats, or the door is closing.

12:44Now, we've seen low inventory. We see Amazon do this, like only three left, or buy your ticket now before the price increases, things along that nature. So this strategy in particular, it makes potential buyers think there will never be a better time than right now to buy this. And that's what we all want our customers to think. We want everybody to think, wow, now is the time to get this. Wow, I'm making such a great decision. This is why things on Black Friday do so extraordinarily well. There is this commonly held belief that now is the right time to buy because I will never get a 12 % discount on this eye cream again, most likely statistically you will, but you feel a lot better about it on Black Friday.

13:27Y 'all, the psychology of buying. So let's get into a little bit of an example. There is a restaurant here in Newport Beach. It's a cafe. They only stay open till 1.30 in the afternoon, and they only do cinnamon buns every weekend, but they do a limited amount. And so it's a tiny little cafe. And oftentimes you'll see a line out the door and people in the line, it's like pandemonium. It is the craziest experience. People are saying like, can you hold my order? And the hostess, bless her heart, to the front, she's like, sorry, we can't hold any orders. You can only make the order at the table. And then other people will say, I'll pay double.

14:03Just hold my order. I want to pre-buy my order. Can I order it to go and then have them heat them up when I get into the cafe? You guys, I was in this line being like, what are these cinnamon buns laced with. This is crazy. But people were driving orders due to the limited amount. That is scarcity. And I mean, y 'all, we experienced during the pandemic, right? It's like you see pictures of people in Costco buying 897 rolls of toilet paper. Like how many years do you think you will not be using toilet paper? But what was it? Scarcity. This is the psychology of buying. So if you know that there's a psychology of buying, look at your offers and think, is there a particular point in time, that I might be able to drive a limited amount of time to buy a limited amount of offers.

14:47So you want to start thinking what is going to make a person make that decision faster. And this plays into the fifth strategy. So I think that the fourth and fifth strategy are very similar, but the slight difference. And this is going to be showcasing your product and service. And then you want to show like, whoa, there's a lot of demand for this. Okay. As much as we would hate to admit it to be the truth. It is just the truth. People associate popularity with value. It makes you cringe, right? Because you're like, yeah, but how do I become popular? So I'm more valuable. Like, why is my offer not as valuable as that other offers?

15:20Just because they have more followers, they have a bigger newsletter list, or they're just having to be friends with those famous people. Listen, I don't make the psychological game. It's just how people often perceive it. So people associate popularity with value, and it makes things seem more exclusive and prestigious when other people want it. And what happens during this is something is floating along that lines. People have fewer hesitation, right? Because they're just like, man, this thing has had sustained popularity. This thing has been more exclusive. It's been so much more successful in the market.

15:51When people see that again and again, they're more likely to make a decision faster. So let's bring out an example. Let's say there's this really popular taco truck called Tomas's taco truck. And Tomas has homemade pickled radishes, mango, jicama, slaw, mango, jicama. Okay. He has like the whole nine yards. Like Tomas has a taco truck or actually, should I say en español, la toda la enchilada, right? Like you go to his taco truck and he has it. Oh, now every night there's a line stretching around the block for his specialty tacos. There's a lot of hype on social media about Tomas's tacos. And they're like, oh, these are a must try.

16:28And then people are taking photos and they're like proudly sharing it. It's like, look at tacos at Tomas's. It was worth the wait. You know, that kind of content is worth its weight in gold because the constant demand and the social proof, it makes the taco truck seem like a really special treat. It's worth the wait. You want to talk about it. So how can you apply this to your business? By your most popular offer. Why not label it for what it is? Label it as the most popular or the most loved. Now we see this a lot happen in like tech offerings. Like if you want to buy like a SaaS offering or a software product, you'll go in and be like, they give you like three monthly options or four monthly options and they'll label it like best value, most used.

17:09And I'm going to like, call me basic, y 'all call me basic. But if I go to an online retailer and I'm very unfamiliar, I will click on the tab that says bestsellers. Does that make me basic? It probably does. But I don't have time to go through and like, let me find the voice of this brand. I'm really just going to be like, let me see your best stuff. If I like your best stuff, I might order it, test it out. But basically what they're saying is here's the fastest way to get to a yes. And you've probably seen this like on Amazon when they're like the store's choice or X amount of hours to get it before Monday.

17:38This is inciting people to make a psychological decision faster. Welcome back. I hope these five pricing strategies gave you some fresh ideas on how to increase your sales and grow your business. I hope you enjoyed this episode, friend. Thanks for listening to the Jasmine Starr Show.