Pricing is an essential element of your marketing strategy. Together with product, place, and promotion, the pricing strategy tells a lot about your products’ quality and influences the success of your business. While the classical pricing strategy starts from the assumption that each consumer is rational, the behavior-based pricing strategy is based on a totally different perspective. Behavioral pricing has demolished many myths, making entrepreneurs re-think their marketing strategy. For instance, the idea that “clients have a predefined willingness to pay” is completely false.
Even though many might think that consumers’ price acceptance is mainly driven by value, the reality is totally different. People are not paying only for the features a product might have. They develop their pricing acceptance based on many factors, among which the most important is the company’s reliability. This article is going to show how you can build a healthy behavioral pricing strategy and adapt your key marketing concepts based on it.
How should your marketing strategy look when you adopt behavior-based pricing?
Have you ever wondered what determines your client’s willingness to pay? Your customers are influenced by your product’s quality, but the circumstances you use to present and sell your products also play a decisive role. Below you can find some marketing tactics to help you implement behavioral pricing:
Use the separation effect. This means that you can make a split between the moment your client pays for the product and when he actually uses it. This is extremely efficient for products that have a big utility today, which will decrease tomorrow. Therefore, your client is influenced by the circumstances and he will be more willing to buy your product today, especially when he knows that he can pay for it at a later stage.
Offer your clients a limited number of options. They will be more likely to pay the price for your products when he is offered a limited number of alternatives. What happens if you offer 20 different products instead of 6? Even though you may think that your clients will be able to analyze each option and choose the best alternative, this actually doesn’t happen. When they face a large number of alternatives, your customers will feel overwhelmed and abandon the purchase idea as they will feel that the marginal utility is higher than the expected utility.
When dealing with face-to-face negotiations, it is always better to start presenting your top-of-the-range product. Will your client buy it even though it exceeds his budget? Of course! First, you should avoid mentioning the price as much as possible. You will present the products’ extraordinary features without telling how much it costs. This is how your client will develop a feeling of possession towards that product before he knows that it is out of his budget. Finally, when you mention how much the product actually costs, you will be surprised to see that your client is actually open to pay it without objections.
Use as much as possible the power of context. Can you ever imagine if there is any difference between a lemonade bought from the grocery store and one from a 5-star resort? None! However, any client would be more willing to pay a higher price for the lemonade from the luxurious resort. The location’s prestige and context influence your customer’s willingness to pay your price.
In conclusion, the behavior pricing strategy should be developed after an intensive research on your client’s behavior. It is very important to know which are the elements that make your customers buy a product or not. Use the strategies above and take your business to the next level.