Pricing Strategies: The Commercial Proof
December 28, 2016
Over recent posts I’ve covered a lot of different pricing strategies that you should consider for your business.
But people still often come back to me and say “Yeah, but my business is different .. none of this will not work for me.”
I’ve a simple answer to that. A lot of people think their business is different and these strategies will not work, but that is because they haven’t fully understood the strategy.
I’m not saying that they all fit your business; but some of them will.
Take the Power of Three, above is an example from PresenterMedia Let me explain how this works.
The offer is one months licence for $39.99
A year for $59.99
and two years for $99.99
and of course these are all reductions from the original price … !
Does it really make sense to pay for one month when a full year is only a little more? and the full year looks really good value when priced against two years … I must admit I actually use PresenterMedia a lot so I went for the two year option. But most first time buyers would go for the full year as being the best deal between the length of time and price.
They have not only used the Power of Three but they have added an extra incentive … BT Reward Cards. Interestingly a couple of days later each of the three offers were exactly the same at £125.
Classic Pricing Experiments
If you want to understand how this works look at the research carried out at Duke University by Joel Huber and Christopher Puto at Duke University in North Carolina.
Their paper, Adding Asymmetrically Dominated Alternatives, Violations of Regularity and the Similarity Hypothesis, tells the whole story. They focus on how students buy beer, but the rationale applies to buying virtually anything. The crux of it is that as soon as you add a third option the overall value of sales goes up. Read the paper to get the details.
And of course it isn’t about how many customers you have. It’s about income.
Commercial Pricing Experiments
In the UK The Times newspaper went from charging nothing for their digital edition to charging £2. They saw their reader numbers plummet. But profits rose!
I strongly suggest you read through the various posts on Pricing Strategies and find the one .. or maybe more .. that suit your business and customers. It could really boost your profits.
How useful was this post?
Click on a star to rate it!
We are sorry that this post was not useful for you!
Let us improve this post!
Thanks for your feedback!