With the holiday sale season in full swing, retailers are scrambling to find effective ways to encourage customers to choose their store when hunting for that perfect gift for their loved ones.
It’s easy to get caught in the whirlwind of cutting your prices down until your margins are razor thin, or offering “loss leaders” in an attempt to get customers through the door, but how do you convert these bargain-minded consumers into valuable customers willing to purchase those higher-margin items? Here’s a few creative tips you might want to consider:
Show Them The Value Of The Sale
This might seem like an obvious suggestion, but it’s not one that most businesses follow consistently. Customers will only believe they’re getting a good value if they have a tangible idea of how much money they’re saving. Big box retailers like Kohl’s are famous for having things always on sale in part to take advantage of this. They go one step further and point out how much you saved at the bottom of every receipt. Intuitively, customers know that the ‘retail’ price is likely a lot higher than most people will pay, but it givsees them an anchor, or point of reference, to compare the sale to.
Even if you permanently drop the price of an item, you should consider keeping the original price listed as a reference for your customers.
Customers Will Pay More For A Perceived Premium
While some shoppers will always choose the cheapest of any product offered, many are looking to try and get the best value for their money. Most customers will pay a premium if they feel that they’re getting a markedly better product.
Instead of offering one item at the cheapest possible price, offer three items. The first will be the inexpensive loss leader while the other two will be more expensive “premium” alternatives. For most product categories, the middle option will sell better than either alternative. This tactic is used effectively by SaaS companies, who nearly always offer three options instead of two or four or seven.
Every Price Ends With A 9
When you’re selling something, make sure the last number in the price is a 9. This tactic is most famously used at gas stations, where you can get gas for $2.999 a gallon. Drivers understand that there is no “tenth of a penny” coin, and so that listed price is really $3, but they will still fill up their tank at a station offering gas for that price over one selling it for $3.00.
In fact, selling a product just under the next $10 marker will lead to MORE conversions than if you drop the price. Researchers at the University of Chicago and MIT tested selling the same product at $34, $39, and $43. Despite being a higher price, items offered at $39 had a 30% higher conversion rate than those sold for $34.
Since our brains process numbers left to right, $34 and $39 are both considered “about $30,” but at $39, your brain also interprets this as “that’s less than $40!” You should have every price possible end in a 9, even if this means slightly increasing prices, which brings me to the last, and most unconventional point.
Just Double The Price
Our culture is conditioned to equate a higher price to mean that something is also of a higher quality, even if this is not the case. Dunkin Donuts famously ran a blind taste test where they discovered that most participants preferred their coffee over that of Starbucks, even though Starbucks has a reputation as being the premium brand. Customers will pay more for something they feel is a better product, but one way that we decide the relative quality of an item is based on the price.
One reason college tuition continues to increase is because schools discovered that the number of students applying tended to increase the more the institution raised their prices. Would-be applicants and their parents equate the cost of the education with the quality of the degree, even if the two are not directly related.
If your prices are too low, it’s easy for your shoppers to assume that either the quality of your products are lacking, or that there is some other reason your prices are so low (such as a lack of customer service). Increasing the price of your products, even doubling them, has the potential to improve the perceived value of your brand in your customers mind.
Sometimes the way to improve your conversion rate isn’t just to drop the price. By implementing some of these creative suggestions, your conversion rate and per-item revenue could increase.