“Basically A ‘How To’ Guide For Manipulating The Average Person”: Person Breaks Down Popular Pricing Strategies In 12 Simple And Comprehensive Visualizations
Businesses put a lot of effort into figuring out the right prices for their products. Set it too low, and you leave money on the table. Make it too high, and you can say goodbye to sales that could have made your year.
Finding the ideal number means choosing a strategy that’s appropriate for that particular situation. And Imgur user ShlomoGenchin thought it would be interesting to explore some of the most common options.
But what’s really awesome, after they did all the homework, ShlomoGenchin decided to summarize everything in simple visualizations and post the images online where everyone could see them.
1. Decoy Pricing. The premium costs only a bit more than the decoy but provides much more value
Image credits: ShlomoGenchin
2. Location Pricing
Image credits: ShlomoGenchin
3. Relative Pricing. Good positioning makes customers compare your product with more expensive products
Image credits: ShlomoGenchin
4. Social Pricing. People tend to only speak about very expensive or very cheap stuff they bought
Image credits: ShlomoGenchin
5. Magic of the Middle. Those who don’t know the market, or don’t care, will usually choose the middle option
Image credits: ShlomoGenchin
6. Bundle Pricing. Use bundling to sell more while reducing the price just a little
Image credits: ShlomoGenchin
7. Breakdown Pricing. Break down the high price into smaller units
Image credits: ShlomoGenchin
8. Price vs. Value. Is the price the main benefit? Emphasize it. If not, emphasize something else
Image credits: ShlomoGenchin
9. Urgency-Based Pricing. Create scarcity by promising to raise prices
Image credits: ShlomoGenchin
10. The Rule of 100. If the price is lower than $100, discount in %. If it’s higher than $100, discount in $
Image credits: ShlomoGenchin
11. Premium vs. Low-Cost
Image credits: ShlomoGenchin
12. Penetration Pricing
Image credits: ShlomoGenchin
Bonus: Pricing Placebo
Image credits: ShlomoGenchin
The phenomenon that identical products are perceived differently due to differences in price is called the “marketing placebo effect” and just as with medications, it has an effect solely due to ascribed properties: “Quality has its price!”
To illustrate the effect pricing has on consumers, ShlomoGenchin concluded their post with an excerpt from a 2017 study, conducted by scientists from the INSEAD Business School and the University of Bonn.
The researchers invited 30 participants (of which 15 were women and 15 were men, with an average age of around 30 years) and offered them some wine.
The wine tasting took place lying down in an MRI scanner, allowing brain activity to be recorded while participants were sipping. But each time, the price of the wine was shown first. Only then around a milliliter of the respective wine was administrated to the test person via a tube in their mouths. The participants were then asked to rate with a push of a button on a nine-point scale how good the wine tasted to them.
Their mouths were then rinsed with a neutral liquid and the next identical wine sample was given for tasting.
“As expected, the subjects stated that the wine with the higher price tasted better than an apparently cheaper one,” Professor Hilke Plassmann from the INSEAD Business School reported.
“However, it was not important whether the participants also had to pay for the wine or whether they were given it for free.”
To highlight the effect these strategies have on consumers, the original poster also mentioned an interesting study
“How much the customer is willing to pay for the product has very little to do with the seller’s cost and has very much to do with how much they value the product or service they’re buying,” Eric Dolansky, Associate Professor of Marketing at Brock University in St. Catharines, Ontario, told BDC, the bank for Canadian entrepreneurs.
According to Dolansky, pricing is one decision that shouldn’t be driven by accounting.
The customer needs to find that the price falls within their range of what’s acceptable, and a company’s ability to price is constrained by its costs.
To choose the right price within the customer’s acceptable range, businesses must consider the following factors:
- operating costs;
- scarcity or abundance of inventory;
- shipping costs;
- fluctuations in demand;
- competitive advantage;
- perception of the price.
Different pricing strategies can and do co-exist as a product evolves through its lifecycle in the market. Companies need an overall price strategy (e.g., cost-based or value-based), they need to determine generally how high or low the price will be (skimming and penetration pricing), and they need to respond to competitors (competition-based pricing).
For example, someone may want to initially price their product using a value-based approach, then switch to a skimming strategy and conclude with penetration pricing.
Pricing is one of the most important and visible aspects of market strategy, which also includes promotion, placement (or distribution), and people (a formula, known as the classic Four Ps of marketing).
The price you offer, Dolansky said, must be consistent with “how you would like to be seen among your competitors, and consistent with your promotional messages, your packaging, and types of stores that your product is in.”
Suppose your product is premium olive oil. It needs to have a premium price that reflects the refined packaging, distribution in better grocery stores, and upscale promotional messages.
However, at the end of the day, all pricing strategies are double-edged swords. What attracts some customers will repulse others. Nobody can sell all things to all people.
Here’s how people reacted to this post
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Share on FacebookThis is why you learn algebra and percentages, so you can work out the cost per unit or cost per volume to work out which is actually the best deal.
Ever see the Penn & Teller show, "Bullsh!t"? They had an episode where they made a fancy restaurant with a "water sommelier", but they just used the same water (from a garden hose out back) and just used fancy bottles and poetic descriptions and charged high prices, and everyone was like "Ooh this water is so much better!". It was hilarious 😂
I love when this kind of exposé is made. I watched a different show that used brownies that were stale/a few days old to emphasize how presentation matters to taste. One was wrapped in plastic and picked up at the counter by the till, the other was in a glass case, served on a glass plate with a fork and a light dusting of icing sugar. They were from the same original pan/batch. Guess which one repeatedly "tasted better" even before being eaten.
Load More Replies...My local supermarket has just pulled a psychological trick. They have removed most of the small trolleys so that people are forced to use the larger ones. In return they feel stupid or feel it is a waste of a journey for only putting a few items in a big trolley so buy more things.
Lol, I hate it when places do that, because I end up just doing w/o a cart, and buying what I can carry w/me. Good for my budget, bad for my ability not to drop things
Load More Replies...Paper goods like toilet paper and paper towels have all started this weird thing where "6 jumbo rolls = 18 regular sized rolls". Makes absolutely no sense. You (the company) defined the roll size. It obviously works, but I think if folks would stop and think about, they'd realize that they are paying $25 for 18 rolls of toilet paper. Or in company speak "$24.99 for 18 jumbo rolls of TP which is the equivalent of 480 normal roll!!!!! Yahoo!!!"
They sometimes list the price per sheet. But how do they know how many pieces I use when I take a sheet.
Load More Replies...A shop in my city did this psychological trick. Their banner says, "This shop is about to sold. We're emptying our inventory at wholesale prices". This is their banner from last two years.
2 gimmicks that should be illegal: 1 is where stores like department stores advertise a sale (like 50% off), but before the sale they re-tag all the merchandise to a higher retail price before sale. An item might normally be $55. They advertise 50% off, and change the price tag to $100. The other is Buy One Get One Free where they almost double the price. It's all a scam. My grocery store just had a "sale" on 12-paks of pop. Buy 3 for $25.99 and get 2 free! Not a deal at all. Whenever you buy something, pay attention to the cost per unit weight. Bigger is not often the best value.
They start increasing prices well before Christmas to make it look like a deal. I thought you were going to say the signs that have 50% off in huge red letters, and then in smaller font you see it is really buy one get one... 50% off
Load More Replies...These mostly strike me as over-simplifications. Like little stories we tell ourselves to manufacture the feeling of control when it doesn't meaningfully exist.
Something they didn’t mention in the “wine study” was that the people who were drinking the “cheap” wine actually had the more expensive stuff. People who drank the “expensive” wine actually had the cheap stuff.
And that actually can explain the results. People who are not expensive wine drinkers on a daily basis are usually not experienced to drink more expensive wines. And they prefer the taste of cheap wines. (And nothing wrong with that in my opinion). Expensive wines have a different more strong flavour and are supposed to be 'sipped' super slowly (not drank). Basically if you would bring people based on their background I think they would be able to tell which wine is the expensive stuff. (And I don't drink wine at all, I'm just basing it on my experience on buying gifts - most people don't like the taste of more 'expensive' wine, but ask about where I bought the 'cheap' wines)
Load More Replies...My wife and daughter complained the water I bought on sale tasted bad. I argued all water taste the same and it's all gimmicks. So we put it on a test. I bought different water brands so they can rate them blindly. Medium to premium water had high ratings, tap water and cheap water had the lowest. It was fun we should do it again.
All water definitely does not taste the same. My preferred water is actually the tap water at my house. But some brands of bottled water are disgusting and others are okay. I don't have any idea what the different brands cost I just know some of them taste better than others. But my tap water is better than any of them.
Load More Replies...I don't understand why we are still falling for the €9.99 price looks cheaper than €10, when it's been around for years, but most of my Spanish friends are surprised when I automatically round it up. They'll say, oh that's 9 + 4, so I've spent 13 so far, when it's really 10 + 5 = 15.Having said that, I fell for it the other day because a shop near me adds the 0.99 cents in TINY writing! All you see is the big number, then you're in for a surprise when you get to the counter and a few extra euros have been added on the way. Very dodgy!
I don't know if they still teach about tasters and non-tasters in science class but I'm a taster and uniquely strong one. I can actually taste through my nose or olfactory receptors, it sounds strange but I sometimes think it's to make up for all of my allergies because I'm allergic to so many foods but I can cook most of them but I can't eat them, which means I can't taste test what I'm cooking. I'm going to cook for my family what they love and I'm not going to deny them just because I'm allergic, that's not right, so I just prepare something different or alter the recipe for myself. But I need to know it's not awful and the only way to do that, for me, is through my very sensitive sense of smell. I've had Covid 5 times and I've never completely lost my sense of taste or smell. It's been dulled but never lost. And I don't like yucky water and I won't buy even if it's cheaper. I buy by price by volume but if the quality is poor it's not a bargain, so you may have to choose.
I love water, drink all kinds of it. Smart water is over priced but at least taste good. Kroger water is the best and it is cheap. Fiji water is the worst in taste. I don't understand why it is the most expensive. Ice mountain sucks throw it in the back up the mountain.
I think that waiakea water is the best tasting and core is pretty good. Smart water isn't bad but I won't pay the price unless I find the watermelon mint one which isn't too often in my area.
Load More Replies...No, I'm not drinking tap water. Most tap water tastes awful and it's bc of all the stuff they put in the water. And no, I tried a Brita, it didn't work. At least in the US most tap water tastes gross at best and harmful at worst. It's not worth it to drink.
Hey, guys, thanks for sharing my work. Is there a way to get in touch with you?
I have been using the bottle of water example for years. Even when gas was the 99c a gallon.
As long as tap water is drinkable in my home contry (germany) I usually don't pay a cent for water in super markets whatever price or sales tactic they're using!
Yeah, but this tactic applies to other things as well.
Load More Replies...Buying a 40 pack of water bottles at Costco for 3 bucks: "You underestimate our power."
There is a solution for this: It's called Caveat Emptor. Let the buyer beware. If you are stupid or simply too lazy to pay attention you deserve to pay more. You are the real problem in this equation at that point.
When looked at in isolation, this doesn't seem like a problem. But, having to go through arithmetic for every single purchase becomes tiresome and people take shortcuts so they don't have to spend an exorbitant amount of time shopping. Yes, buyer beware, and this article / post is warning people how the pricing system works so that you are aware.
Load More Replies...This is why you learn algebra and percentages, so you can work out the cost per unit or cost per volume to work out which is actually the best deal.
Ever see the Penn & Teller show, "Bullsh!t"? They had an episode where they made a fancy restaurant with a "water sommelier", but they just used the same water (from a garden hose out back) and just used fancy bottles and poetic descriptions and charged high prices, and everyone was like "Ooh this water is so much better!". It was hilarious 😂
I love when this kind of exposé is made. I watched a different show that used brownies that were stale/a few days old to emphasize how presentation matters to taste. One was wrapped in plastic and picked up at the counter by the till, the other was in a glass case, served on a glass plate with a fork and a light dusting of icing sugar. They were from the same original pan/batch. Guess which one repeatedly "tasted better" even before being eaten.
Load More Replies...My local supermarket has just pulled a psychological trick. They have removed most of the small trolleys so that people are forced to use the larger ones. In return they feel stupid or feel it is a waste of a journey for only putting a few items in a big trolley so buy more things.
Lol, I hate it when places do that, because I end up just doing w/o a cart, and buying what I can carry w/me. Good for my budget, bad for my ability not to drop things
Load More Replies...Paper goods like toilet paper and paper towels have all started this weird thing where "6 jumbo rolls = 18 regular sized rolls". Makes absolutely no sense. You (the company) defined the roll size. It obviously works, but I think if folks would stop and think about, they'd realize that they are paying $25 for 18 rolls of toilet paper. Or in company speak "$24.99 for 18 jumbo rolls of TP which is the equivalent of 480 normal roll!!!!! Yahoo!!!"
They sometimes list the price per sheet. But how do they know how many pieces I use when I take a sheet.
Load More Replies...A shop in my city did this psychological trick. Their banner says, "This shop is about to sold. We're emptying our inventory at wholesale prices". This is their banner from last two years.
2 gimmicks that should be illegal: 1 is where stores like department stores advertise a sale (like 50% off), but before the sale they re-tag all the merchandise to a higher retail price before sale. An item might normally be $55. They advertise 50% off, and change the price tag to $100. The other is Buy One Get One Free where they almost double the price. It's all a scam. My grocery store just had a "sale" on 12-paks of pop. Buy 3 for $25.99 and get 2 free! Not a deal at all. Whenever you buy something, pay attention to the cost per unit weight. Bigger is not often the best value.
They start increasing prices well before Christmas to make it look like a deal. I thought you were going to say the signs that have 50% off in huge red letters, and then in smaller font you see it is really buy one get one... 50% off
Load More Replies...These mostly strike me as over-simplifications. Like little stories we tell ourselves to manufacture the feeling of control when it doesn't meaningfully exist.
Something they didn’t mention in the “wine study” was that the people who were drinking the “cheap” wine actually had the more expensive stuff. People who drank the “expensive” wine actually had the cheap stuff.
And that actually can explain the results. People who are not expensive wine drinkers on a daily basis are usually not experienced to drink more expensive wines. And they prefer the taste of cheap wines. (And nothing wrong with that in my opinion). Expensive wines have a different more strong flavour and are supposed to be 'sipped' super slowly (not drank). Basically if you would bring people based on their background I think they would be able to tell which wine is the expensive stuff. (And I don't drink wine at all, I'm just basing it on my experience on buying gifts - most people don't like the taste of more 'expensive' wine, but ask about where I bought the 'cheap' wines)
Load More Replies...My wife and daughter complained the water I bought on sale tasted bad. I argued all water taste the same and it's all gimmicks. So we put it on a test. I bought different water brands so they can rate them blindly. Medium to premium water had high ratings, tap water and cheap water had the lowest. It was fun we should do it again.
All water definitely does not taste the same. My preferred water is actually the tap water at my house. But some brands of bottled water are disgusting and others are okay. I don't have any idea what the different brands cost I just know some of them taste better than others. But my tap water is better than any of them.
Load More Replies...I don't understand why we are still falling for the €9.99 price looks cheaper than €10, when it's been around for years, but most of my Spanish friends are surprised when I automatically round it up. They'll say, oh that's 9 + 4, so I've spent 13 so far, when it's really 10 + 5 = 15.Having said that, I fell for it the other day because a shop near me adds the 0.99 cents in TINY writing! All you see is the big number, then you're in for a surprise when you get to the counter and a few extra euros have been added on the way. Very dodgy!
I don't know if they still teach about tasters and non-tasters in science class but I'm a taster and uniquely strong one. I can actually taste through my nose or olfactory receptors, it sounds strange but I sometimes think it's to make up for all of my allergies because I'm allergic to so many foods but I can cook most of them but I can't eat them, which means I can't taste test what I'm cooking. I'm going to cook for my family what they love and I'm not going to deny them just because I'm allergic, that's not right, so I just prepare something different or alter the recipe for myself. But I need to know it's not awful and the only way to do that, for me, is through my very sensitive sense of smell. I've had Covid 5 times and I've never completely lost my sense of taste or smell. It's been dulled but never lost. And I don't like yucky water and I won't buy even if it's cheaper. I buy by price by volume but if the quality is poor it's not a bargain, so you may have to choose.
I love water, drink all kinds of it. Smart water is over priced but at least taste good. Kroger water is the best and it is cheap. Fiji water is the worst in taste. I don't understand why it is the most expensive. Ice mountain sucks throw it in the back up the mountain.
I think that waiakea water is the best tasting and core is pretty good. Smart water isn't bad but I won't pay the price unless I find the watermelon mint one which isn't too often in my area.
Load More Replies...No, I'm not drinking tap water. Most tap water tastes awful and it's bc of all the stuff they put in the water. And no, I tried a Brita, it didn't work. At least in the US most tap water tastes gross at best and harmful at worst. It's not worth it to drink.
Hey, guys, thanks for sharing my work. Is there a way to get in touch with you?
I have been using the bottle of water example for years. Even when gas was the 99c a gallon.
As long as tap water is drinkable in my home contry (germany) I usually don't pay a cent for water in super markets whatever price or sales tactic they're using!
Yeah, but this tactic applies to other things as well.
Load More Replies...Buying a 40 pack of water bottles at Costco for 3 bucks: "You underestimate our power."
There is a solution for this: It's called Caveat Emptor. Let the buyer beware. If you are stupid or simply too lazy to pay attention you deserve to pay more. You are the real problem in this equation at that point.
When looked at in isolation, this doesn't seem like a problem. But, having to go through arithmetic for every single purchase becomes tiresome and people take shortcuts so they don't have to spend an exorbitant amount of time shopping. Yes, buyer beware, and this article / post is warning people how the pricing system works so that you are aware.
Load More Replies...
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