6 Pricing Strategies You Always Fall For

Article was originally published on http://ElevateNotes.com

Were you ever curious how companies get you to buy stuff, that you sometimes don’t even need? Or spend more money than you intended?

Or, as an entrepreneur, how can you price your products in a way that will compel your prospects to buy, buy more, and more often? These will help.

Knowing these tactics and strategies will make you better at pricing maximize your revenue. This will be a handy guide to avoiding some tragic/costly mistakes as well as getting ideas to test on your own business.

Let’s get going.

1. NO PAIN SALES, or Removing Roadblocks

The best way to sell something is to make the process as easy as possible. Unfortunately, a lot of businesses make it very hard on their customers. We are here to help you sell more. Here are few short sweet ways to do just that.

  • Bundle commonly bought items. Neuroeconomics expert George Lowenstein notes the LX version of car packages as a great example of successful bundling. It’s easier to justify a single upgrade than it is to consider purchasing the heated leather seats and the navigation and the roadside assistance individually.
  • Sweat the small stuff. In another CMU study, trial rates for a DVD subscription increased by 20 percent when the messaging was changed from “a $5 fee” to “a small $5 fee,” revealing that the devil really is in the details.
  • Appeal to utility or pleasure. For conservative spenders, a message focusing on utility is more effective: “This back massage can ease back pain.” More liberal spenders are persuaded by a focus on pleasure: ‘This back massage will help you relax.”
  • It’s either free or it is not. “Free” is a very powerful word, as proven in Dan Ariely’s book Predictably Irrational. According to one of the examples, Amazon’s sales in France were drastically lower than all other European countries. The reason turned out to be the following: French orders had a 20-cent shipping charge added (versus a free shipping in the other countries). It’s best to not nickel-and-dime small charges; they could be drastically reducing conversions.
  • Bonus Stacking. One of the favorite technics of Frank Kern. It’s essentially putting a lot of bonuses on top of an already good offer. Time sensitive bonuses that expire within short period of time can increase sales tremendously.

Start testing these points in your business immediately. These will eliminate pain points for your customers that might have hurt your sales.

Great example of eliminating pain points is free blog setup service CustomersEngine. The USP, unique selling proposition is that CustomersEngine will set up a WordPress blog within 24 hours (on a newly purchased hosting), hacker-proof it, spam-proof it, install 7 best plugins according to best practices of WordPress and will give you $110 worth of marketing bonuses.
All for free. The only thing required of a customer is to purchase a hosting, through their link.
This way hosting company sponsors them. CustomersEngine wins. Customer wins. Win-win, all the pain points eliminated. It is a no-brainer for somebody to use the service.
To study how pricing of CustomersEngine works, click here.

2. “USELESS” PRICING, or Decoy Effect

This particular example was taken from Dan Ariely. He came across this subscription offer from The Economist. It became a famous example in his book Predictably Irrational (which, incidentally, is on our Reading List)

first version of Economist subscription model

Note that the basic plan became the popular plan instead of the 3rd option, after the 2nd option was removed.

Contrary to popular belief, people don’t know what they really want. They are susceptible to influence and require external information to help them make that decision.

Outtake from Dan Ariely’s TED Talk about Economist Pricing Experiment

What was happening was that customers began to compare the middle option to the latter option (since their prices were similar) and this comparison made option 3 look like an excellent deal.

Without the middle option, we can see that the price points set by the economist had too much contrast: when the middle option was taken away, people looked at the two prices and tried to convince themselves that they didn’t need the “upgrade”.

Essentially, they became “bargain hunters” rather than “value seekers” which are the kind of customers you really want.

With appropriate pricing in place, you can offer customers options that fit their budget, while at the same time influencing “on the fence” customers that your more premium offerings give enough benefit that their extra price is justified.

So… the “useless” pricing option was not that useless after all?

Conclusion: Always purchase what you need. Not what you think is the best deal.
For entrepreneurs, use this tactic with care. Continue reading to find out how this tactic backfires.

3. OLD CLASSIC — 9, or “Mighty Nine”

Go to a supermarket and you will see prices ending with 9 everywhere. $49 vs $50, everyone knows that they are basically the same. Certainly, everyone can see that it is a marketing trick but … can they resist its effect?

According to research from Quantitative Marketing and Economics, the answer is a definite NO. Prices ending in 9 works so well it even outsells the SAME product with lower prices.

Graph shows how prices ending with 9 are more likely to drive sales. $49 price point yielded more sales than $44

Moreover, in this book Priceless , William Poundstone analyzed 8 different studies on the use of prices ending with nine and found that, on average, they score higher sales by 24 percent more than their nearby price, i.e. $39 versus $40.

In an experiment conducted by MIT and University of Chicago, one women clothing item was tested with $34, $39 and $40.

Surprisingly, items priced at $39 had larger sales, even more than $34 pricing.

In short, given a similar situation, a price ending with 9 will still beat a cheaper pricing.

Conclusion: For consumers, ignore the power of 9! Round it up to the higher number, because that’s really what you get.
For an entrepreneur, ignore the power of 9 at your own risk! And if you are wondering, $49 beats $49.90.


How to a sell a $14.90 meal? Next to a comparable $29.90 meal that you don’t even intend to sell.

How to sell a $49.90 mobile plan? Next to a $200 premium plan hardly anybody signs up for.

Here is an example of anchoring in Market Research

Example of Anchoring. You are more likely to name a higher number in Case #2

This is known as anchoring. Anchoring refers to the human tendency to rely too heavily on the first piece of information(the “anchor”) offered when making decisions.

In fact, you can spot it everywhere. Go to your local pub/bar, you wonder if anybody every order that exorbitant drink. Go to Rolex, a $2000 watch looks cheap beside a $10,000 watch. Yet, that $2000 watch looks like a premium purchase when put beside a $200 Swatch.

Here comes the interesting part — If you are an expert, you are less likely to be fooled right? Wrong.

In a pricing research experiment, professional property agents were asked to estimate the price of sample houses with information of the house’s list price. Researchers manipulated the house’s list price, providing high and low anchors.

Results: All the agents were influenced by the list price, yet they denied factoring list price into their decisions, instead claiming that the feature of the property justifies their estimates.

Conclusion: Getting the first offer isn’t always good. If you can, protect yourself from anchoring by making the first offer.
In negotiations, always flip this on its head. Always make first offer at a much higher (lower) price that you intend to sell (purchase). This way you anchor them to initially high offer and then you both agree on a more reasonable number. But guess what? You had that number in your mind from the very beginning.


When you encounter a range of pricing options, do you go for the “safer” option, picking the middle option? Well, you are not alone. In the book Priceless, William Poundstone did a pricing experiment with beer.

Case #1

Initially there were 2 beer options

These were the initial pricing options the bar offers. 80% of the customers chose the premium offer. Would it be a good idea to capture a new pool of customer base by adding a cheaper option? Let’s take a look at case #2.

Case #2

Introducing cheaper version created revenue drop

Take a close look at the numbers. Assuming there were the same number of purchases, did revenue increase? Surprisingly, total revenue dropped! Luckily, we explored Anchoring and “Useless” pricing in this article.

You guys can see clearly that when pricing tactic are utilized wrongly, it can cause a negative effect.

Case #3

Case #3 — Removal of cheap version and replacing it with Premium option

Now in case #3, they removed the $1.60 beer and replaced it with $3.40 beer. In the end, more people chose the premium beer than before.

Interestingly, there are always people who are willing to fork out more for the best, whatever the price.

At Elevate we jokingly call this technic Golden Toilet. Why? Once a member of my team while preparing a copy for a client website and saw a picture. A picture with a Golden Toilet. Worth … $4.8M. Here it is.

No matter how high your price is … always remember this. There is a toilet selling for $4.8M.

Golden Toilet on sale worth approximately $4.8M

There were studies done in a pool table shop. At first, they arranged all the tables from the entrance further into the shop, with prices you would see cheap pool tables first, prices increase as you go further into the shop.

They’ve received a certain number of sales per month.

Then the shop rearranged tables in different order. Right when you walk into a shop, you are being hit with $10.000 pool table, with fancy carving and new technologies that go along with a table. As you go further into the shop, prices become more and more reasonable.

Which one worked better? ….

2nd option outsold first one by a huge margin.

Conclusion: Beware of the middle option, it may be placed deliberately to sell you what they wish to sell.
For entrepreneurs, try placing a super premium product.
Always have a high-level offer for your clients, to anchor them to a higher price. There will be a certain amount of people that will go for premium done-for-you service or premium product. Ones who won’t purchase it will have an easier time purchasing lower price options.


Which campaign do you think you are more likely to join? “Donate a dollar a day!” versus “Donate $365 a year! ” ? Both campaigns ask the donor for the same amount of money. Yet, the former is more successful.

This is because people compare what they have to spend with what they can buy. A dollar is about the same as a cup of coffee but $365 can pay for a new phone. Time is an entity poorly grasped by humans.

As such, it is important to frame a price such that its pricing perception is within a reasonable range. How can buying a coke for $5 be reasonable? In a bar with enjoyable ambiance where they “normally” sell alcohol.

Alternatively you “create” a “new” category by changing product name from coffee to Americano. Writing names on coffee cups. Change whatever you can so that people have no reference to fall back, eliminating perception altogether, creating a new price category.

Conclusion: Focus on what you are paying for if that is your focus. Remember wise words of Warren Buffet: Price is what you pay, value is what you get.
For entrepreneurs, understand and improve the perceived value of your product. How can you change perception, unique selling proposition of your product, so that it couldn’t be compared to similar products in the category? How can you eliminate commodity aspect of your product? Great questions to answer.

A great example of the reframe and changing perception — Steve Jobs’ USP for an Ipod. Instead of featuring the amount of Gigabytes and all the characteristics of the iPod, he reframed it to the following: Carry 1000s of songs in your pocket.

Reframe Benefit vs Feature. Features tell, Benefits Sell.

One of the good ways to differentiate yourself and distance from a competition is to price based on value and benefits as opposed to features.

Comment and let us know which of these pricing studies surprised you the most. Which one of these are you gonna implement in your business, and how?

Here is another positive reframe. Our blog posts take on average 7–9 hours of research and writing to complete, and are always actionable and based in reality. It simply works. Treat this as a $1000 high level seminar, and implement this in your business as soon as possible. Comment with your takeaways and insights. ❤

Originally published at Elevate Notes.

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Originally published at elevatenotes.com on October 1, 2016.