Brain Driven Brands: Boost Sales by 21% By Pricing Backwards

Episode Release Date: November 19, 2024
Host: Sarah Levinger
Guest: Nate
Podcast Title: Brain Driven Brands
Episode Title: Boost Sales by 21% By Pricing Backwards

Introduction to the Pricing Strategy

In this episode of Brain Driven Brands, host Sarah Levinger and her guest Nate delve into an innovative pricing strategy that has the potential to significantly boost sales for e-commerce brands. The core idea revolves around allowing customers to "Pick Their Own Price," a tactic that reportedly increased sales by 21.6% without altering the average price point.

Notable Quote:
Sarah: "In studies when brands allowed customers to pick their own price, it increased sales by 21.6%. Even though when you averaged all the prices that they chose, it was basically the same as the original core price."
[03:07]

Understanding the "Pick Your Own Price" Model

The "Pick Your Own Price" strategy empowers customers by giving them the freedom to choose how much they want to pay from a set of predefined options. For example, customers might be presented with pricing tiers like $5, $10, or $15 for a single product.

Notable Quote:
Sarah: "You give people freedom to choose how much they want to pay from a limited set of options. So do you want to pay $5, $10, or $15?"
[03:31]

How It Works

Despite offering multiple price points, the average price remains consistent with the original pricing. This approach leverages psychological factors to encourage customers to select higher price options, thereby increasing overall sales without decreasing the perceived value of the product.

Notable Quote:
Nate: "It is about price. Yes, yes. This is a weird one, too. I never thought of doing this, and I'm like, this is so smart."
[02:48]

Psychological Underpinnings

Social Context and Payment Choice

Sarah and Nate explore how social context influences purchasing decisions. The presence of multiple price options can lead customers to feel a social pressure, often discouraging them from choosing the lowest price to avoid feeling like they're undervaluing the product.

Notable Quote:
Sarah: "You can't pay five in front of the person who's getting that money."
[04:46]

Decoy Effect

The Decoy Effect plays a significant role in this pricing strategy. By introducing a middle-tier price option, brands can guide customers towards selecting that option, as it often appears to offer the best value compared to the lower and higher tiers.

Notable Quote:
Sarah: "Decoy effect basically means that if you have two prices at two different subgroups, if you add in a third, specifically in the middle tier, most people are going to purchase that middle tier price."
[14:09]

Price Anchoring

Price anchoring is another psychological principle discussed. By presenting multiple price points, customers anchor their perception of the product's value, often leading them to perceive higher-priced options as more valuable.

Implementation Strategies

Email Campaigns and Dynamic Testing

Sarah and Nate discuss how e-commerce brands can implement the "Pick Your Own Price" model through targeted email campaigns. By asking customers about their budget for specific occasions (e.g., Christmas gifts), brands can segment their audience and guide them to appropriate product tiers.

Notable Quote:
Nate: "We're 100% going to do some email campaigns that are like, tell us your budget for Christmas and we'll get you the highest value watch at each price point."
[22:26]

Testing and Optimization

The hosts emphasize the importance of testing different pricing strategies to understand customer preferences and price sensitivity. This includes experimenting with price ranges and analyzing how different segments respond to various pricing tiers.

Notable Quote:
Sarah: "It's going to become like our pricing segment... test your prices and test your titles of your products."
[17:20]

Case Studies and Previous Attempts

Nate shares his experiences with similar pricing strategies in past projects. In one instance, allowing customers to choose between saving money or donating to a charity led to mixed results. While some campaigns saw success, others did not perform as expected, highlighting the importance of context and execution.

Notable Quote:
Nate: "At the first rebrand, Donate 10 dominated the product though... At OG turned it into Save $50 or Donate $50. Everyone took the $50 savings for themselves."
[10:46]

Practical Advice and Recommendations

Tailoring to Your Brand

Sarah and Nate advise brands to tailor the "Pick Your Own Price" model to fit their unique product offerings and customer base. For instance, offering additional perks or free gifts for higher price tiers can incentivize customers to choose more expensive options.

Notable Quote:
Sarah: "If you can ask them and if you can segment people by budget or by household income... It's a huge principle."
[13:06]

Leveraging Consumer Insights

Understanding customer behavior and preferences is crucial. Brands should consider factors like the time of day, social context, and customer demographics when implementing dynamic pricing strategies to maximize effectiveness.

Notable Quote:
Sarah: "What time of the day were they running this particular promotion?... All of this comes into play when it comes to consumer behavior and how people actually purchase things."
[07:55]

Conclusions and Takeaways

The "Pick Your Own Price" strategy offers a powerful tool for e-commerce brands looking to boost sales and enhance customer satisfaction. By leveraging psychological principles such as social context, the decoy effect, and price anchoring, brands can optimize their pricing models to better align with customer preferences and maximize revenue.

Final Notable Quote:
Nate: "The most impactful thing you can do for your marketing is to test your prices."
[17:27]
Sarah: "If you can get... a good title, and really solid pricing psychology... you might not have to run a sale ever again."
[17:34]

Key Insights

• Empower Customers: Allowing customers to choose their price can lead to increased sales without compromising the average price point.
• Psychological Factors: Understanding social context, the decoy effect, and price anchoring is essential for successful pricing strategies.
• Continuous Testing: Implementing and testing different pricing models through email campaigns and dynamic testing can help identify the most effective approach.
• Tailored Approaches: Brands should customize their pricing strategies based on their unique product offerings and customer demographics.

For more insights on advanced neuromarketing strategies and pricing psychology, stay tuned to Brain Driven Brands with Sarah Levinger.