96 ideas for optimizing your pricing, deals, and offers (Part Two)
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In the first article in this series, we described many strategies we’ve used to skyrocket the profits of businesses by optimizing their pricing, deals, and offers.
In this article, we describe how you can boost profits even further.
Not all of the points will apply to you, but we have found that one breakthrough idea is often enough to transform a business. As you proceed down the list, we recommend you make notes of how you could implement each idea.
Add premiums (free gifts) and incentives to get a big uplift
- Information is a great thing to give away as a premium, because it has zero (or almost zero) costs of sale and can have incredibly high perceived value. Think of valuable information that your customers would love to have. For example, a person buying a health supplement to help them sleep may highly desire a report that describes how to get a good night’s sleep. You can deliver the information in a wide range of formats, including audio, video, electronic or printed reports, software, tools, or access to websites.
- If some of your offering involves information, consider how the information can be made to educate the buyers about how to buy your type of product, and how to appreciate the ways in which your product is superior. This works well in B2B sales, because B2B buying is often complex. B2B buyers therefore value “decision-support materials.” A seller of web hosting, for example, could benefit from giving away a guide called “7 Mistakes to Avoid When Choosing a Web Hosting Solution.”
- Consider offering particular premiums only to customers who spend more than a certain amount. One of our favorite techniques is to offer a valuable free report for customers who buy one unit, an additional free report for customers who buy three units, and a further free report for customers who buy five units. A buyer who wants that third report can never get it if they always order one unit at a time. This offer alone can greatly increase the average order value.
- If a customer is paying with someone else’s money (such as their employer’s), consider options that will reward the person personally. Companies that sell to businesses often use rewards such as meals, events, air miles, cash back, and gift vouchers. (Of course, don’t offer anything that’s unethical or illegal.)
- Offer incentives to encourage prospects to behave in a certain way. For example, if you want all the orders to be placed via the web, or via the phone, offer incentives for customers who order via those channels.
- Offer discounted prices if visitors order quickly (e.g., early bird discounts) or in large quantities.
Versioning: Hugely increase profits by offering different deals to different people
It helps to have different pricing for different people:
- The common law of business balance describes consumers’ belief that “you get what you pay for.” So many customers have a price in mind before they begin shopping, and will pay that price regardless. (A friend of ours went looking for a suit, expecting to pay about $700. He found one that looked good, but it cost just $70. He decided against it, preferring to stick to his plan of finding one that cost more. Imagine how frustrated the store owner would have been to know that not only did she not sell the suit, but that she would have sold it if she had charged ten times as much for it.)
- Create pricing segments for each of your groups of customers. For example, you may choose to have different prices for enterprises, small businesses, and domestic customers. Then, start from the point of view of the customer: begin with the price they’d be prepared to pay, and then work out what the product or service should be at that level. Ensure that each price level contains a “deal maker” or “deal breaker” component that makes it worth it for the buyer to pay the extra amount.
- Create gold, silver and bronze levels of pricing, so you are more likely to have a price point at the amount that a given buyer was thinking of paying.
- Consider a price that’s ten times your current highest price, and then imagine what kind of product or service would justify that price. A company that advises people on getting work permits may usually charge $500 per client. The company might benefit from exploring what a $5,000 service would entail. Who would use it? Even if only a small fraction of buyers took advantage of such an offer, the effect on the economics of the business could be significant.
- Bestow status levels upon your customers: Have different levels of customers, and publicly reward those on the higher levels by giving them a higher status and benefits. People are naturally competitive and aspire to become better customers. This technique is used by every producer of luxury goods. Even credit card issuers manage to charge more for premium gold and platinum cards.
- Offer a loyalty program, whereby the buyers get certain rewards once they have purchased a certain number of units from you. This encourages them to return for more, thus forming a habit, and increasing your lifetime customer value. As every cafe knows, it helps to give customers free loyalty points to begin with, so their reward account has a value from the outset.
Test your prices to see which ones win
Testing pricing can be a thorny issue. Some users may contest it. However, changing pricing is one of the most surefire ways of increasing (or decreasing) a company’s profits, so there’s a high value in doing it (and a high cost to getting it wrong—which is a good reason to A/B test it).
One effective option is to run A/B testing to offer different prices to different users, but then, once they have ordered, to charge them all the lower price, to make it fair. Bear in mind that—as with all A/B testing—buyers who use more than one device may see different versions of your pricing.
Another (less scientific) option is to test different prices on different days or weeks.
In both cases, it can be hard to measure the results if your buying cycle is long. But if it’s short, and you sell a lot of units per day, you can gather vital information in a matter of hours.
Increase sales just by optimizing how you describe the offer
Sometimes, you don’t need to change the offer or the value proposition; you just need to change how you describe it. The following techniques work well:
- Position yourself as—and actually be—the prospects’ trusted advisor, so they know you’re acting in their best interests. This is incredibly important—be very careful not to squander your integrity for the sake of one quick sale. As Moz’s Rand Fishkin says, the best way to sell something is to not sell anything. Instead, earn the awareness, respect, and trust of those who might buy.
- Make prices look larger by displaying the decimal points (“Free gift—a $29.00 value”) or lower by hiding them (“Costs only $29”).
- Odd prices work slightly better: $9.99 is perceived as being disproportionately lower than $10.00. This is presumably for the same reason that people get excited when their car odometer clicks over to 10,000 (even though it’s just another mile), and sad when they reach their fortieth birthday (even though they’re only a day older than they were the day before).
- If a price has been reduced, put a slash through it to avoid confusion, so it’s clear that it’s not the current price. So rather than saying “Was $119, now only $89,” say, “
Was $119, now only $89.”
- If something is free—and the offer sounds too good to be true—mention that’s it’s free several times, in different ways. For example: “It’s free, so you pay nothing, no strings attached, no hidden charges, absolutely no cost to you whatsoever.”
- People find it easier to understand fractions than percentages—so it’s better to say “half-price” or “one-third off” than “50% off” or “33% off.”
- Use apples-to-oranges comparisons to remind people what great value the product is. If you’re selling a training course, compare it to the cost of a college education, highlighting the net benefit by showing students who have gone on to get jobs. If you’re selling a shed, compare it to the cost of having a house extension. If you’re selling a video conferencing solution, compare it with the price of international travel. You can make almost any product sound like a great deal by comparing it to the price of something the buyers are already squandering their money on, like lattes or beer. Which makes you wonder how anyone ever manages to sell lattes or beer.
- Consider expressing the price in a way that makes the numeral less: like changing a monthly rate to a daily rate.
Give a reason why you’re making such a great offer
Buyers don’t always want the cheapest option (e.g., a Casio digital watch), but they do want a bargain (e.g., a Rolex Submariner for only $3,000). However, a bargain needs a good rationale. If the deal is great—as it should be—explain why, with proof. The following approaches can help:
- “Our prices are great because we cut out the intermediaries and sell directly to the consumer.”
- “This is an opening sale.”
- “This price is a special product-launch price.”
- “This is a special offer for new customers.”
- “This is a special offer for existing customers.”
- “This is an end-of-line clearance promotion” (the offer is about to change, and there’s scarcity).
- “This promotion is linked to a certain event” (e.g., Christmas, summer, back to school, or Black Friday).
In all cases, give indisputable proof. If the product was previously sold at a higher price, give details (when, where, how much)—and justify why that price was reasonable. If it’s cheaper or better than competitors’ products, give details, maybe with a comparison chart.
Add payment options that buyers want
Different customers tend to have different preferred methods of ordering and paying. It’s often best to offer the ones they are most comfortable with:
- Payment method
- Credit card or debit card
- PayPal, Google Checkout, Amazon Pay or Apple Pay (some iOS users are much more likely to purchase if Apple Pay is supported)
- Direct debit or standing order
- Purchase order
- Credit card over the phone
- 0% finance
- Cash on delivery (which is popular in some countries)
- Payment schedule
- Pay in multiple installments (which is good when the initial price point is high).
- Until the customer cancels: if your service is charged on a monthly basis, you keep charging the customer until they cancel it. You may choose to specify a minimum term, before which the customer may not cancel. (This is popular with telecoms providers.) You can increase sales further by optimizing the length of the minimum term (e.g., twelve months, eighteen months, or twenty-four months), which tends to affect the take-up rate.
- If your service has a monthly fee, consider also offering a discount for customers who commit to paying annually. This will be great for your cash flow, and customers are less likely to cancel early.
Change the offer, to stay interesting
Ideally, you want to be constantly iterating toward whichever offer is optimal. However, in some industries, it helps to vary things just to stay interesting.
Just ensure that in doing so you’re constantly learning what works.
Almost all of the strategies described in this two-part series are ones we’ve successfully used—in many cases with increases of over 50%, 100%, or more.
We hope you managed to find at least one strategy that skyrockets your sales.
© 2020 Implementra Limited trading as Conversion Rate Experts. All rights reserved.