EP: 94 - The Psychology of Pricing ...

Give value. Give value. Give value. Then ask for business.” ~ Gary Vaynerchuk

Welcome to Episode 94: The Psychology of Pricing ...
 
I don’t know about you, but I truly feel that there’s something magical about January ... It’s not only the start of a new year, but it also feels like a great time to turn to the next chapter in business. We personally aren’t ones to make resolutions, but we do strongly believe in keeping on top of our goals. So, this month, we encourage you to revisit YOUR goals, adjust if necessary, and put your plans in motion! 

Psssst … it’s also a great time to splurge a bit on yourself and buy a new planner and some fun stickers that inspire you to keep on track. Digital planners or calendars are great, too, but there’s just something about writing things in a visually appealing planner. 

And speaking of planning and revisiting goals, we wanted to start with a different kind of topic in the realms of your price point and the psychology behind it all as there’s truly no better time than now to re-evaluate you worth.  

Here's what we will be untangling in this episode ...

• The psychology behind the numbers
• Leaving imposter syndrome behind you
• Leading with decision-based principles
• Evaluating your current prices and putting things into play
• Our “untangling” checklist for upping your prices 

Are you ready?
Pop in your awesome earbuds and let's dive in!

Transcript

Hey there Digital Glue insiders and HAPPY New Year!

I don’t know about you, but I truly feel that there’s something magical about January ... It’s not only the start of a new year, but it also feels like a great time to turn to the next chapter in business. We personally aren’t ones to make resolutions, but we do strongly believe in keeping on top of our goals. So, this month, we encourage you to revisit YOUR goals, adjust if necessary, and put your plans in motion! 

Psssst … it’s also a great time to splurge a bit on yourself and buy a new planner and some fun stickers that inspire you to keep on track. Digital planners or calendars are great, too, but there’s just something about writing things in a visually appealing planner. 

And speaking of planning and revisiting goals, we wanted to start with a different kind of topic in the realms of your price point and the psychology behind it all as there’s truly no better time than now to reevaluate you worth. 

So, let’s start with the psychology behind the numbers as there’s a few ways you can go about doing this. We’ve narrowed down the top 4 pricing strategies for you. And they go a little something like this …

1. CHARM PRICING.
   Which is a simple method of using a pricing strategy that reduces your offering by one cent, making it end is a “9” or a “99”. It’s a good way to market your values as one’s brain tends to process $200 and $199 as different values. To one’s brain, $199 is actually perceived as $100 which is way cheaper than $200.
   
   
2.  PRESTIGE PRICING.
   This type of pricing is the opposite of charm pricing as it involves making all values into rounded figures, meaning $199 is then turned into $200. This has a like affect as charm pricing does, but in a different sense as it’s more fluently processed and encourages reliance on the consumers’ feelings, compared to charm pricing which relies on cognition. 
   
   To the consumer, rounded numbers just “feel right” because the purchase is being driven by feelings and the price point is easy to quickly process.
   
   
3.  COMPARATIVE PRICING.
   Some say that this is the most effective psychological business strategy for any entrepreneur as it involves simplicity between two or more offers that are comparable. But … making one of the offers much more attractive than the other. 
   
   This way for the consumer it isn’t a “game” of choice because to the average human, if something is a bit more expensive, then it’s considered higher quality and well worth the few extra dollars.
   
   
4.  BOGO PRICING.
   This is a fun marketing play and a no-brainer as it’s a true win-win by offering the consumer a buy one, get one free offer. The strategy here is simple … once a customer comes across the offer, logic completely get tossed into the wind then their main focus is making the purchase in order to get the free item. 
   
   Some may think of this strategy as consumer greed. But we tend to think of it as a creative one as it’s providing the consumer with extra value at a discount for double what they would normally get. And a happy consumer is a returning one.

 We also like to add a few more ourselves through retainer packages based on hours purchased that are discounted from our hourly rate. And … bundled packages that usually come with a handful of virtual needs at a discounted rate. Most of our bundled packages also come with a choice of add-on services for our dream client to pick and choose from based upon their current business needs.

 Okay, so now that you know the 4 most common pricing strategies and the psychology behind them all … I hope you’re not feeling overwhelmed by choice and wanting to crawl back into bed thinking about your own strategy.

That was how we felt when we last tackled this big internal to-do. And we don’t want you to feel that way, which is why we’re here today “untangling” this with you!

Now, for many of us entrepreneurs, pricing our offers comes with a load of virtual baggage of something called imposter syndrome -- which boils down to an underlying lack of confidence alongside the fear of rejection and perhaps even failure. And don’t you know it … a heck of a lot of hard work re-implementing a new pricing structure. Especially if you have a virtual buffet of offerings like we do that you want to put into play to your current client roster, while also honoring their everlasting faith in you, and to your dream potentials.

So, before you go ahead and dive into the heavy work, it’s also important to understand the principles of persuasion that align with the psychology behind it all. Then once you align our top 4 strategies with these principles, you will be able to breathe easier and make better decisions about how your offerings should be priced.

According to all the research we’ve done on these principles, they are as follows:

• offering value
• building trust
• being consist
• sharing social proof
• speaking with authority
• creating community, and
• creating an atmosphere of scarcity

Now before you start rummaging through all your virtual paperwork trying to figure out which of these strategies and principles align with your business, it’s important to begin this process by knowing your strengths and acknowledging your achievements. Especially when it comes to price points. Many of our tangled clients start an onboarding call off with us by listing everything they feel they are not good at or haven’t yet achieved or have on their never-ending dream bucket list, focusing more on irrelevant parts of their business.

Truth be told, your clients don’t know what they don’t know. But what they do know is what kind of work they have seen from you or heard about, and they want it!

So, instead of feeling piled up with self-doubt and criticism by searching through your weaknesses … humming and hawing on what you feel you’re worth just so you can grow your business and client roster … stop searching for your weaknesses and start focusing on your strengths and what you truly bring to the table. It’s a simple as a bit of research in your market to be able to take a real objective look at how you compare to your competitors. And that’s not just in the numbers, but also what you do differently and how your price points compare.

By understanding your value, you will be able to better see (and use) a more competitive pricing strategy that ensures you’re setting yourself up for long-term success.

 Now comes the big part …

Evaluating your current pricing -- which we suggest doing annually or bi-annually -- and putting things into play.

Each and every year the economy changes. Especially these days and we rummage through our lives dealing with post-pandemic inflation. Which just keeps going up creating cost-of-living changes for everyone. With all these changes happening and well out of your control, your business needs to align and adjust as well.

Yes! Raising your prices can feel stressful. But once you make it a normal routine, it becomes much easier. We personally tend to reevaluate our offerings every two years to make the load of work involved in making it so a bit easier on ourselves.

If you think about it, every year inflation rises about 3 to 5%. So, in turn you should also be raising your prices the same amount. But on top of that, you must also consider if some of your offerings need an additional bump or if you want to increase your entire price point strategy overall.

Think of things this way, in addition to annual inflation, if you’re continuously adding value to your client’s business lives, you already have a more than great reason to charge higher price points.

 Oooookay …. You have all you need now to make a sensible decision on your prices. Now I want to end things off today with a little “untangling” checklist for making this all happen! So, feel free to take some notes or print the list from within the transcript of this episode.

• Send an email to your current clients 60-days before your GO LIVE date.
  • Ensure in the email that you start by talking about your core values as a business, operating costs and that you’re increasing, when the increase date will officially go into effect, and stipulations or “rules” that come with this new pricing territory, then end off my reminding them how much you value them and leave the email open to questions.
  • Also consider grandmothering certain clients into your “old” pricing. Especially if you’ve just recently signed a big contract with a new client. In this case, you probably shouldn’t switch up pricing within a month when you’ve just recently finalized negotiations with them. We suggest giving them an appropriate time period (even if just until the end of the month or term) before bumping the price. And make sure to discuss it with them early so they know it’s coming and it’s not a huge surprise.
•  Update all price points and packages within your contract platform.
  
  
•  Update all price points and packages with your invoicing platform.
  
  
• Create a simplified action plan for tackling all price adjustments on your website. We like to do this in Asana and set dated reminders for ourselves based on each web page – since we have an array of service offerings.
  • Then make all the necessary updates as you have planned.
•  Send a second email to your current clients as a “friendly” reminder 2 weeks before the new pricing structure begins.
  
  
•  Send new contract agreements to your clients 7 days before their current contract expires or their next auto-renewal. Which is a third friendly reminder that your new pricing structure is now in place. 

And VOILA!

We also wanted to let you know that if you’re feeling mighty stuck on how to wordsmith this to your current client’s -- as you’re afraid you might scare them off. We created the most perfect set of human touch emails, and we would be more than happy to share them with you. 

Just drop us an email and we’ll send them over. 

That all being shared today, we very much understand how terrifying this process can be. It’s all too easy to get lost in worrying about raising your prices and losing sleep over it. And you’re may already be fretting about the effects it may have on your business alongside the relationships you have with your clients. But here’s the thing … There is nothing wrong with being paid and compensated for your hard work, your talent and how well you serve your clients. And, with the more money in your pocket, you can likely better serve your clients, your team, your loved ones, your communities, and those in need -- and maybe save the world as a whole.

So, by taking everything we talked about today into consideration and creating a simple yet appropriate strategy, the process will be smooth sailing. It’s as simple as creating a timeline, doing the work, backing it up by research and value, and communicating the entire process effectively -- in-house and to your wonderfully amazing clients.

You are the only one standing in your way of generating more income. 

So, go ahead … raise your prices! You deserve it!

And while doing so, keep in mind that how you pitch and position your price increases will determine the overall success of your business. So, be organized about it all and make it a virtually painless process everyone involved. Including yourself.