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TRANSCRIPT
David is an international speaker, helping audiences to discover simple ways to improve their pricing. After studying Engineering Science and Economics at Oxford, he worked in marketing and business management. He ran a £56m mail order company where pricing is crucial, and has held senior marketing roles in a wide variety of industries. He applies psychology research into consumer behaviour to business and marketing. He illustrates everything with real examples of marketing in action. Session Overview David introduced you to a range of ideas on pricing decisions, to help you with pricing yourself out in the market. He showed you how to develop an action plan to increase your prices which can be implemented quickly and easily, and with little cost. After listening to David you will now know: • How customers make decisions about pricing • One simple thing that will increase your average
order value • How to differentiate your business from your
competition, so your customers no longer compare prices
• An easy change to your price that costs nothing and improves your negotiating position
• Why you might want to call your product The Super 2400
• How a zero can boost your sales
David Abbott How to Price Your Platypus [email protected]
How to Price Your Platypus: Using an understanding of customer psychology to
get a higher price for your product or service
David Abbott
[email protected] 07971 962235
Traditional Pricing Approaches
Cost + Competition
Heuristics(rules of thumb)
But Business Customers Are Rational… Aren’t they?
Parole Decisions No Previous Offenses Rehabilitation Program
65%
% of Prisoners Granted Parole
10%
Shai Danzigera, Jonathan Levavb and Liora Avnaim-Pessoa: ‘Extraneous factors in judicial decisions’, Proceedings of the National Academy of Sciences of the United States of America
Price Anchors
1
0
10
20
30
40
50
60
00-19 20-39 40-59 60-79 80-99
Cordless Trackball Cordless Keyboard Design Book Neuhaus Chocolates 1998 Cotes du Rhone 1996 Hermitage
Dan Ariely, George Loewenstein, Drazen Prelec; “Coherent Arbitrariness: Stable Demand Curves without Stable Preferences”, Quarterly Journal of Economics (2003)
65 10
£7 - £10 £40 - £60
47 77
32
87
59
8
29
6mm PU Foam
9mm PU Foam
11mm PU Foam
11mm Sponge
9mm Crumb
£2.99 £4.99 £5.99 £7.99 £9.99
9mm Crumb
11mm Sponge
11mm PU Foam
9mm PU Foam
6mm PU Foam
£9.99 £7.99 £5.99 £4.99 £2.99
Proposal for ClientSystem 100 Fire Alarm Option 1: £68,000 Premium alarm system BS standard wiring Maintenance Fire suppression Integration with security systems Option 2: £52,000 Premium alarm system BS standard wiring Maintenance Option 3: £43,000 Standard alarm system Reuse existing wiring system
£9.99 £39.99 £49.99
2Price vs
Value
Sales
Low Normal High
Sales
Low Normal High
“No one ever got fired for buying“
”
£69.99
Arbitrary Precision
3
$325,000 ------------ $325,425
27,000 sales analysed Fewer ‘0’s = less discount
Manoj Thomas, Daniel H. Simon, Vrinda Kadiyali: ‘Do Consumers Perceive Precise Prices to be Lower Than Round Prices? Evidence from Laboratory and Market Data’, Johnson School Research Paper Series #09-07, 2007
Petri Hukkanen, Matti Keloharju: 'Initial Offer Precision and M&A Outcomes', Aalto University, Harvard Business School, CEPR, and IFN, November 2, 2015
Malia F. Mason, Alice J. Lee, Elizabeth A. Wiley, Daniel R. Ames: 'Precise offers are potent anchors: Conciliatory counteroffers and attributions of knowledge in negotiations.' Journal of Experimental Social Psychology, 2013
Proposal for ClientSystem 100 Fire Alarm Option 1: £68,189 Premium alarm system BS standard wiring Maintenance Fire suppression Integration with security systems Option 2: £52,943 Premium alarm system BS standard wiring Maintenance Option 3: £43,255 Standard alarm system Reuse existing wiring system
£98.32
1 Price Anchors
2 Price vs Value
3 Arbitrary Precision
5 Price Abstraction
6 The Power of
4 Price Relativity
0
8 Hyperbolic Discounting
9 Charm Pricing
7 Elective Pricing
10 Two-Part Pricing
11 Dynamic Pricing
12 Price Presentation
Most Expensive Per Litre
In the WORLD????
£100
£100,000
£100,000,000
£100,000,000,000
www.amazon.co.uk/How-Price-Your-Platypus-Understanding-ebook/dp/B06XK96VSW/
www.david-abbott-speaker.co.uk/blog/
@davidatinsight
Newsletter – send me a request to: [email protected]
How
To
Pri
ce Y
our
Pla
typu
s! A price anchor can be real (the price someone expects to pay based on previous experience) or arbitrary (the name of the item, a number that’s just been mentioned, or the order that prices are presented).
Offer more than one price if you can - clients will compare prices whatever you do, so give them something to compare, and start with the highest price first.
The price you charge says something about the value the client expects to get - so charge a higher price.
People value things more that they have paid a higher price for!
David Abbott 07971 962235
How
To
Pri
ce Y
our
Pla
typu
s!
Precise numbers ‘feel’ smaller than they really are, so they seem like more of a bargain.
When a precise number is used in any situation where bargaining might occur, the more precise it is (the fewer zeros) the less it is negotiated down. Take care not to make the number seem too obviously arbitrary.
We’ve only scratched the surface. Pricing concepts include Price Relativity (how people compare prices and dummy pricing); the Power of
David Abbott 07971 962235
BUT THERE’S MORE !
Zero (using ‘free’ in the right places short cuts our ability to price compare); Price Abstraction (the farther away a number is from cash the high the price that will be paid);
Elective Pricing (let the client decide what value they received!); and even how prices are presented (why 1,845 sounds bigger than 1845, and what a difference a ‘£’ makes).
If you want to know more I’m happy to talk to you. Pricing is only one part of marketing – if you want a broader chat about marketing (strategy and communications) then give me a call.