4 Powerful Price Hacks That Will Skyrocket Your Sales
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In this week's episode, we unlock the secrets behind the most effective pricing strategies in today’s competitive market.
Join me as I discuss the psychology behind decoy pricing, charm pricing, price anchoring, and The Rule of 100.
Learn why these strategies work and how to stack them for a bigger impact.
Are you a marketer, entrepreneur, copywriter, or buyer-of-things?
Then this episode for you!
It’ll help you understand how smart businesses tweak their prices to sell more. Don't miss this tour through the mind games of pricing strategies.
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(This is transcribed by 🤖 so please excuse the funky sentence breaks, misplaced periods, and typos. The robots are doing their best!)
[00:00:00] It's important to remember that price is all about context. Nothing has an inherent monetary worth. As Warren Buffett said, price is arbitrary. Value is fundamental.Hello and welcome to the Copy Lab podcast, the marketing and business podcast that teaches you how to write better, sell more, and ignite your business even if you suck at writing. I'm your host Sara Estes, entrepreneur, copywriter, marketing strategist, and founder of Copy Tiger, where I help changemakers, disruptors and dreamers get their message to the masses.
Let's get started.
Hey guys. Welcome to this week's episode. As always, I'm super excited to be here with you today. We are going to be talking about all things pricing. And we're gonna be going over a few psychological tips and tricks when you are trying to figure out how exactly to price your product. A couple of very interesting rules and theories that I've picked up along the way that I'm really excited to share with you.
Before we go into the pricing strategy lesson, I want to talk about a really cool copywriting mastermind group that I was able to sit in on this past week, thanks to an amazing client. So one of my clients is a part of Rudy Mawer’s mastermind. And if you don't know who he is, just Google Rudy Mawer. His last name is m a w e r.
And you'll see he's just the, the red guy. It has no political association to my knowledge. He just, in everything about his brand and who he is is the color red. So he's literally in like red pants, red shoes, red hair, red studio, red everything, red microphone. It's just a red explosion all over the place.
Rudy is a world-renowned entrepreneur and marketer investor, and he's got the reputation for being one of the world's like top Facebook ad and funnel experts. So he's kind of built a whole brand for himself in the digital marketing realm. So he has a mastermind that one of my clients is a part of, my client runs a marketing agency.
So he, and he's a part of this mastermind and every Friday they have these copy calls where they talk about copywriting, uh, and people, it's basically a copywriting workshop. So my client was able to bring me in as a team member so I could be on the call, which was awesome. The calls are hosted by Seth Czerepak, who's an awesome copywriter, who has been around for a while and really knows his stuff.
So it was super cool to sit in for an hour and talk about copywriting with those folks. And I wanna say this about these mastermind groups and these calls. As a writer, it can be a very isolating profession. Even when I was a reporter at a newspaper or writing an advice column for a publication and working with editorial teams and all of that, the writing that you do, the actual hours that you spend crafting a piece of writing is usually done in solitude.
There are some people who can go to coffee shops and write or be in public places with a lot of stuff going on and sit on their laptops and write. I'm not typically one of those people. Every now and then, if it's like low brain work, I can do that, but for the most part, if I'm going to be able to write something really good, I need to be in pretty much total solitude for a long period of time.
I have to go deep into my mind palace and pull out all of the stuff, so I love to have groups and beyond Zoom calls with other writers where we can dig in, talk shop, and bounce ideas off of each other. It is super, super fun for me, and being on these Mastermind calls is definitely a highlight of my week.
So something that we touched on in that call – which is part of the reason why I was so inspired to create this episode – we talked about pricing tier structures and what that needs to look like when it's actually on your website. So, say you have three different pricing structures for a course or an event or something where you've got a basic option, you've got a standard option, and you've got a premium option.
If you have three cards, like three boxes that show each one, you need to list the features in each one of them so that someone can visually see that they're getting so much more in that premium offer. So if you've got a basic offer, it might have three little teaser bullets that say what you're getting, and then that standard offer, the next one up needs to have many more teaser bullets that show what you're getting, and then the premium needs to look even beefier than those other two.
And one of the things that they talked about was, for that basic option, you can even cross out the things that they won't get. So you can include some of the features of the standard and premium options, and then, On that very basic one just cross out so that someone can really see what they're not getting when they choose the lower offer.
So during that conversation, based on everyone's reaction, I realized that a lot of people don't know some very basic pricing concepts, and that's why I wanna talk about them today. So that's where the inspiration for this podcast comes from. So let's dive in. Today we are going to be talking about some intriguing strategies like decoy pricing, charm pricing, price anchoring, and the rule of 100.
We're gonna uncover the psychological principles behind these tactics, share cool real world examples of this stuff in action out in the wild, and we are going to chat about how you can mix and match these strategies for a major impact, whether you're an entrepreneur or a copywriter, or you're just someone who's shopping around, this episode is packed with insights that'll help you make better decisions and get the most out of your marketing or shopping experience.
Something I love about talking about these pricing strategies is that you really don't need to be a marketing person or a copywriter or an entrepreneur to use these to better your life. Because even as just someone who is walking around a mall or shopping on Amazon, knowing these strategies and tricks that marketers use to position their pricing in a more appealing way will help you shop better.
And what it's gonna do is that you won't fall for some of these pricing strategies. When you see charm pricing, you'll know exactly what they're trying to do. So this is going to equip you to be a smarter, more conscious shopper. And as a marketer or copywriter, you can use these little tricks to your advantage.
So, All right. Let's dive into our first pricing strategy, which is options or decoy pricing. It's referred to, it's called both things. I typically refer to it as decoy pricing. Now, this method involves offering three options, a high priced item, a low priced item, and then a middle priced item that is designed to be unattractive.
The whole idea is to make the high priced item seem like a better value compared to the others. It's like playing a game of which one doesn't belong with your customers, and it works surprisingly well. Dan Ariely, who is a renowned behavioral economist and the author of “Predictably Irrational”, an incredible book, conducted an experiment that highlights the power of decoy pricing.
So, in this study, he presented participants with three subscription options for a popular magazine. The first option was an online-only subscription, and that was for $59. And then the second, the middle option was a print only for $125. Okay, so you've got that digital only for $59, a middle option, which is the print only for $125, and the third option, was a combined print and online subscription for $125.
So, now you might think “Who in their right mind would choose the print only subscription when they could get both print and online for the exact same price?” Well, that is precisely the point. The print only option served as a decoy. Making the combined subscription seem like an absolute no-brainer. It's a fantastic deal.
So that's what decoy pricing means. It means you have this middle option that is really just pointing the arrow to the higher priced option for everyone so that anyone who's looking at it cannot, in all good faith, choose that middle option because it just doesn't make sense. So what you're doing is you are pointing the potential buyer directly to that high priced offer because it just, it seems like such a sweet deal.
Now what's super interesting is that when Ariely removed the print-only option, the number of people who chose the combined subscription significantly decreased. The decoy had done its job influencing people to choose the more expensive option. So when they had three options, the vast majority chose that higher priced item.
However, when they only had two options, the digital only for $59 or the digital and print for $125, people turned thrifty and chose the $59 option alone. So I think that is super, super interesting when you are trying to figure out how to price your product or service. If you've, if you're giving people options, if you only give them two, there's a very high chance that they'll turn thrifty and they'll pick that low ticket item.
However, if you add a middle item that is priced just below the highest ticket offer, that can act as a decoy, which will encourage potential buyers to buy that higher ticket. Item. So how can we see the strategy in action in the real world? So picture this, you walk into a gourmet popcorn store and you're faced with three different size options, okay?
So you've got the small tin for $5, you've got a medium tin for $15, and a large tin for $20. The medium tin in this case acts as the decoy. Making the large tin look much better. So you might think, “Hell, it's only $5 more and I can get a whole lot more popcorn.”
And there you have it. That is the decoy in action.
So the pricing strategy worked its magic and you move towards the higher priced option. And here's the fun part. Decoy pricing doesn't just work in product pricing. It can be applied to services as well. For example, imagine a gym membership with three different tiers. So you've got a basic at let's say $30 a month, a premium membership at $70 per month, and then you've got the gold at $75 per month.
The premium tier might offer a few extra perks compared to the basic, but the gold tier offers everything in the premium, plus additional benefits like some personal training sessions and access to exclusive classes. So in this case, the premium tier acts as a decoy. Making the gold tier seem like a much, much better value for just a few more dollars.
So that is a little taste of decoy pricing. This kind of sneaky yet effective strategy is all about guiding your customers to the option you want them to choose, making them feel like they're getting a great deal in the process. So it's a win-win for both you and your customers. All right. The second pricing strategy I wanna talk about is called charm pricing.
And you all know this, you've seen it everywhere, and when I talk about it, you're gonna know exactly what I mean. Charm pricing is also known as the left digit effect. It's when you price items just below the round number, like $4.99 instead of $5. This tiny difference creates the perception of a lower price in the minds of consumers, even though the actual difference is only just a penny.
So a great example of this is Netflix. If you go on to Netflix's site right now, you'll see that the basic subscription is $9.99 a month. The standard one is $15.49 a month, and the premium is $19.99 a month. So there you go. There is charm pricing. So instead of putting basic at $10 a month, they put it at $9.99 a month because they're smart and they know that it works.
But the question is, why does charm pricing work? You would think that as humans we would understand fully that it's just a penny's difference. But here's the thing, it does work, and here's why. Psychological research has shown that our brains tend to focus more on the left digit when we're reading numbers.
So in the case of $4.99, even though it's only a cent away from $5, our brains perceive the price as closer to $4 than $5. It's a small trick, but it can have significant impact on how we view prices and how we make our purchasing decisions. And let me tell you, charm pricing isn't exclusive to digital products or small purchases.
It can also be applied to larger and more expensive items. For example, think about the last time you went car shopping. You may have noticed that many vehicles are priced just below a round number. Like $19,995 instead of $20,000. This pricing strategy is designed to make the car appear more affordable, even though the difference in price is absolutely minuscule.
Okay, now let's take a look at how charm pricing can be combined with other marketing strategies for maximum effect. Imagine you're running an online store that sells designer handbags, and you decide to price your bags at $199 and 99 cents. So instead of 200, you're going $199.99. Tapping into that charm pricing effect, but, You don't stop there.
You also offer free shipping on orders over $200, encouraging customers to add another item to their cart to qualify for the deal. So in this way, charm pricing not only makes your product seem more affordable, but also drives additional sales by incentivizing customers to spend more.
Now it's time for the third option: Price anchoring. It's important to remember that price is all about context. Nothing has an inherent monetary worth. As Warren Buffett said, “Price is arbitrary, value is fundamental.” So price anchoring is a proven psychological strategy that we humans use to evaluate what something is worth. Price anchoring is all about setting a high initial price for a product or service, creating a reference point that makes the other option seem more reasonable in comparison.
So what's the psychological reasoning behind price anchoring? It's simple. People tend to rely on the first piece of information they receive when making decisions in the context of pricing. This means that if consumers see a high priced item first, they'll use that as the reference point when they're evaluating other options.
So this can make a lower priced item seem like a total bargain, even if they're still relatively expensive. Let me give you an example of this. Imagine you're shopping for a new pair of noise canceling headphones, and you walk into an electronic store and you see, when you first walk in, you see a top of the line model and it's priced at $500, and then right next to it is a similar pair of headphones and they're priced at $300.
Suddenly that $300 pair of headphones. Doesn't seem so expensive, right? That's price anchoring at work. The high priced item sets a reference point in your mind, making the lower price option appear more attractive and affordable. And like the other pricing strategies, it's not just limited to products.
It can work wonders for your service-based business too. So let's take the example of a luxury spa that's offering three different massage packages. So you've got a 30-minute massage, a 60-minute massage, and a 90-minute massage. Let's say the 30-minute massage is $50. The 60-minute massage is $100 and a 90-minute massage is $130.
Now by showcasing the 90-minute option first, so say you've got a website and the packages are listed as it's scrolling down. So when you list that 90-minute package first at $130, that's gonna set a high anchor price. Making the 60-minute package seem like a much more reasonable and attractive choice for the customers who are wanting that balance between cost and duration.
And let's take it a step further and look at how price anchoring can be combined with other pricing strategies. All right. Say you are running a high-end restaurant and you've got a few different wine options. So you've got a house wine that is $30, and then you've got a premium selection that's $80, and then a very exclusive, super rare vintage for a whopping $300.
By setting the anchor price at $300, your restaurant makes the $80 bottle seem like a great deal in comparison, but you don't have to stop there. You can also use charm pricing by setting the price of that premium wine that was $80, set that price to $79.99 instead, and that's gonna make it appear. Even more affordable.
All right, the last pricing strategy that I wanna talk about is referred to as the Rule of 100, and I learned this from Marie Forleo in her B-school program, which is awesome. Um, this rule provides a really useful guideline for businesses or marketers, copywriters. When you're promoting a discount, so this is gonna help you decide when to use a percentage amount off versus the absolute value, so the dollar amount.
So when do you wanna say this is 75% off, or when do you wanna say this is $50 off? The Rule of 100 states that if the dollar amount is over a hundred dollars, you should promote the dollar amount off, and if it's under a hundred dollars, you should use the percentage off. The reasoning behind this is that consumers tend to perceive discounts as more substantial when they're presented in the most favorable format.
So let's take a look at some examples of how a business can apply the Rule of 100 to their advantage. Let's imagine you are selling a digital course for $2,000. Now, if you are offering a 10% discount on that course, it's gonna be $200 off now. So the question becomes, should you say that it's $200 off, or should you say that you're offering 10% off now based on the Rule of 100, because the amount of money that is being taken off is over a hundred dollars.
So because it's $200, you're gonna say, In your promotions that it's $200 off. So the average buyer is going to consider $200 to be more substantial in value rather than saying 10% off. Right? So the $200 just seems way more impactful than saying 10%.
So on the flip side, let's say you run a clothing store and you're selling some jeans that are normally $60. Let's say you decide to run a promotion of 20% off. So that means that the buyer is getting $12 off their price. So the rule of 100 would say if you've got 20% or 12, you're gonna choose the 20% to promote.
So because that $12 is under 120% is gonna sound like a more substantial deal. So the next time that you want to offer a promotion, say it's a 40% discount on something, take a look at the actual dollar amount.
And if that's over a hundred dollars, you wanna ditch the percentage and use the dollar amount off. If it's under a hundred dollars, then consider using the percentage. Now, this is not a hard and fast rule. You know your customers and you know what is going to impact them, but it is a good general starting point for deciding which one you should use.
So you can use all of these pricing strategies together to create a massive impact. So not only can you use the rule of 100 to decide what your discount is going to look like, so whether or not you're gonna use a percentage or a dollar amount off, but you can also use that price anchoring to make sure that you have a really high offer that is presented first.
And then you can also use the term pricing to do something like $49.99 rather than just $50. So, all of these things can be combined to drive your conversions.
Alright, so those are the top four pricing strategies that I know and love and use all the time in my copy for all you entrepreneurs, copywriters, or just savvy shoppers.
Getting the lowdown on these pricing tricks can help you make better choices, whether you're creating awesome marketing campaigns or you're just hunting for awesome deals. By using these strategies in your business, you can get customers excited, you can boost your sales and watch your profits soar. And just on a personal level, being hip to these pricing schemes can help us make better buying decisions.
So the next time you're out shopping or scrolling through online stores, keep an eye out for decoy pricing and charm pricing and price anchoring and see if you can spot the rule of 100 out there doing its thing. Who knows, you might end up making smarter choices and choosing the product that you actually wanna buy instead of being swayed by some of these little tricks.
All right. Thanks so much for nerding out with me about pricing strategies. I hope that you've gotten some value out of this and that you can use it in your business or in your personal life. We're gonna end it there.
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