The Psychology of Pricing
The following stories are true. The author personally witnessed each as it unfolded. There is a commonality, which will become obvious.
1. A young man spends $400 on a new set of tires for his car, and then promptly totals the car. He pulls the new tires from the car and displays them in his front yard with a sign that says “New tires, $10 each.” No one even stops to look at them. After two days he changes the sign to read $5 each.”
2. A convenience store operator decides to get rid of two cases of cans of an off-brand fuel additive which haven’t sold at the recommended $1.67 per can. He puts the individual cans in a basket near check-out marked “Twenty-five cents each.” No one buys even a single can.
3. A music store has a collection of posters for guitarists and keyboard players which explain chord theory. They’re left over from last year’s inventory, and aren’t selling at the imprinted price of $5.95 each. Much like the convenience store owner, the music store owner displays the posters near check out. He prices them at fifty cents each. They don’t sell, and the owner is now considering dropping the price to twenty-five cents just to get them out of his inventory.
Interestingly, the solution is the same in each case.
Raise the price.
The young man changes his sign to read “New tires, $50 each.”
The convenience store operator marks the cans “Cleans fuel injectors like nothing else. $4.95 per can.”
The music store tags the posters at $5.95, and adds a small sign to the effect that the poster is a valuable reference for any recording studio.
The tires sold. The fuel additive sold out. The posters sold out.
Consider it from the perspective of the potential buyer. There’s a psychology of pricing in which the old saying “You get what you pay for” is the lens through which the buyer views the world. Consciously or unconsciously, the vendor conveys the value of his product through its price. If the price is ridiculously low, the goods must be of low worth. But displaying them proudly, at a premium price, conveys value, too.
Everyone appreciates a bargain. No one wants to buy junk.
Would you have any interest in $5.00 tires?
Why would you even consider putting a twenty-five cent additive you’ve never heard of in your car’s fuel tank?
Would you even glance twice at a piece of “art” that costs only a quarter?
You don’t want to sell junk, do you?
What’s in your inventory that you need to move? Can you price it aggressively, and move it to a high-profile location?
Drop a note and let us know how it turns out for you.