Psychological Pricing

[Blurock]

I am doing a bit of research on psychological pricing etc.
This is quite an interesting topic to see how retailers entice buyers with different marketing and selling techniques.

Obviously businesses have been hurt with lockdowns all over and the majority are now applying different pricing strategies.
An increasing trend is to change the packaging in such a way that it confuses the buyer e.g a 100g slab of chocolate is reduced to 80g, but the price remains the same. Gradually the price on the new packaging has increased. The consumer's brain still has the old 100g price in her head, but is now effectively paying much, much more!

E.g. If the 100g slab cost R10, and is then reduced to 80g @ R10, the effective price increase is from 10c to 12.5c per gram = 25%.
If the price of the new 80g slab now increase from R10 to R12 (only R2 more than the original 100g slab) the total increase against the old price is 15c per gram. That is a total increase of 50%!!

Retailers make it difficult for their unobservant customers to calculate the price of food in Kg's as they package in portions of 400g , 800g etc.
For semi-literate people and the average consumer this is difficult to understand as not everyone can convert to a price per Kg to compare products.

Therefore consumers should always demand a price per kg to be displayed on the package.

[Justloadit]

Absolutely criminal in my book.
Coke used to be a 500mL Buddy, now it is 400mL. Wonder how many have actually noticed this.

I use the calculator on my phone to get a 100ml/g price then decide on the package size. Its amazing to see how one gets ripped off. I have seen in some cases the difference being up to 40% from a 400mL to 750mL package.

[adrianh]

I love this topic because I do all the shopping with my two daughters.

There are many things that they do, here are just a couple:

1. They have slightly different products with different barcodes at different retailers so its extremely difficult to compare prices.
2. I am heavily involved in a particular branch of the food industry and I can see that there are really just 2 manufactures yet there is a proliferation of in-house brands for the specific products. It is interesting to note that the one manufucturer told me where to buy the best quality - It ain't Woolworths its actually Checkers.
3. We saw the other day at a well known pharmacy chain that their in-house brand of a particular vitamin supplement which happens to be 100% the same as a branded product is less than half the price. We placed the two packs side by side and they are exactly the same - word for word.
4. More isn't always cheaper - I've seem products where the smallest pack is was the cheapest - maybe they were dumping stock.
5. Mass isn't always a good measure - now the buggers add 50% water to the sardines rather than 10% like they did in the past.
6. Coffee is manufactured weaker and sold in the same container - so you either use more or pay for the more expensive version.
7. Pharmacies sell the exact same product (same brand just slightly different wording) with different packaging at different prices.
8. Generics aren't always cheaper - the buggers make the stuff on the same production lines as the original and often charge more for the generic because they know everybody are besotted with generics.
9. Spray paint seems to be manufactured by one or two companies. You often find 3 brands next to one another in the same shop at vastly different prices yet when you look at the manufacturer its exactly the same.

Then of course there are my shopping pet hates:
1. I can't stand the constant noise - Radio blaring plus in store announcements plus queue control all over each other.
2. The damn "sweetie gauntlet" - where you are forced to spend 20m bottled in an aisle with hordes of screaming children.
3. They can never find our details even with their own in-store cards.
1-3. Clicks in a Nutshell - I will never ever go there again!

[GCE]

I used to do extensive work in the printing industry on the printing presses - Been to Germany for training on Man Roland presses.
They would run a brand of X , whether it was eggs, milk ,chocolate, wheel bearings - On a 5 color press 2 color plates would be changed and the package looks totally different even though the original wording remains the same as mention above .

You then walk into the shop isle and because you had seen the change at printing time it would jump out at you - I would look at the product and the wife would want the expensive one even though they are packaged and produce exactly the same. She often won the argument which is probably why she is the ex wife.

People would argue with me until I showed them a pic from the production line at a Milk factory that I had to sort out a problem at on the packaging line for the printer .

We have become to gullible as human beings.

We need to shoot all Marketing people at birth and then we would not have the problem ( will let Dave put the smiley face here because I cant seem to )

[Blurock]

1. Innumeracy

My first example of the chocolates bar was innumeracy, where consumers are unable to recognize or understand fundamental math principles as they apply to everyday life.
Which do you think is a better deal? “Buy one get one free” or “50% off a two items?” According to a study done by researchers at the University of Minnesota, most people would prefer the first option, even though the two options are identical (buying two items at 50% off is the same as paying full price for one and getting the second free). Other ways that innumeracy appears in pricing include double discounting, coupon design, and percentage pumping.

2. Artificial Time Constraints

I'm sure that you have seen these before, ironically this urgency happens every month end and weekends; Everything is "50% off!!" One day sale!
Truth is; the sales will be there again next week
These “1-Day only” signs are known as artificial time constraints. Retailers place these restrictions on their sales because they act as catalysts for consumers to spend. They want customers to believe that the sales are only temporary, so that they’re more likely to make their purchases today, rather than next week. Consumers are afraid of missing out, plus, they’ll feel peer pressured to buy after seeing all of their fellow shoppers take advantage of the bargain.

There's great power in creating artificial demand, but it can backfire if it deteriorates your brand. Selling at low margins does is not always a good strategy. value add is better.

[Derlyn]

My wife checks price per Kg or per litre meticulously before putting something in the trolley.

Last week she pointed out to the supermarket staff that the cooking oil in bulk was more expensive per litre than a 750ml bottle with the hope of them reducing the bulk price.

NOPE. They just increased the 750ml price. She should have kept quiet.

Very interesting thread, Blurock.

Peace out .. Derek

[ians]

The sad part is no matter how much the price increases and the size decreases ... brands like coke will still make budget come the end of the month.

[adrianh]

The other side of the coin is that creating artificial scarcity does work as a sales tactic - People will fight for the "last 3" but won't bother at all if they know that you have 20 under your desk (that remain the "last 3" for a while).

[Blurock]

Adrian

The other side of the coin is that creating artificial scarcity does work as a sales tactic - People will fight for the "last 3" but won't bother at all if they know that you have 20 under your desk (that remain the "last 3" for a while).

Absolutely true. Another example of Artificial Time Constraints. Creating artificial demand is a powerful marketing tool. You can take advantage of this psychological fear when you’re selling your own products, from shoes to enterprise software. Reverse the sales paradigm by branding your product as an exclusive, must-have item. I remember some years ago when a new chocolate bar was introduced and the manufacturer could raise the price after creating a "shortage" in the face of great demand lead by extensive advertising.

3. Charm Pricing
Charm pricing is the official name for prices ending in all those 9's. Researchers at MIT and the University of Chicago have proven that prices ending in 9 create increased customer demand. This psychological phenomena is driven by the fact that we read from left to right. When we see a price at R1999.99, we do not see 2000, but we see the 1 first and perceive the price to be closer to R1000 than it is to R2000. In essence, ending your price in a 9 convinces customers that you’re offering a great deal.

[adrianh]

Absolutely true. Another example of Artificial Time Constraints.

This is very true. I used to sell a lot on Bid or Buy. When a product is put onto BoB as a "Buy Now" (meaning you can get it whenever you want) people simply don't buy the product. Yet, if you put the same product on as an "Auction" with a very short time frame then it sells. Also, products put on with shorter Auction cut-offs are more likely to sell than items put on with long run times - I think it might be because when the customer sees the item as short-cut off they react immediately rhather than think they can go back later (and probably forget to do so)

As an aside: The stuff placed on the counter right at the till is known as "Koop en loop" in the industry..... those ultra expensive, mostly rubbish products that you grab and add to your purchase without thinking. My daughters and I found that some products cost twice as much as the equivalent product placed on a normal shelf. The "forced 20m sweetie isle" that we are herded through like cattle is a long drawn out "Koop en loop" trap!

[Blurock]

This is very true. I used to sell a lot on Bid or Buy. When a product is put onto BoB as a "Buy Now" (meaning you can get it whenever you want) people simply don't buy the product. Yet, if you put the same product on as an "Auction" with a very short time frame then it sells. Also, products put on with shorter Auction cut-offs are more likely to sell than items put on with long run times - I think it might be because when the customer sees the item as short-cut off they react immediately rhather than think they can go back later (and probably forget to do so)

As an aside: The stuff placed on the counter right at the till is known as "Koop en loop" in the industry..... those ultra expensive, mostly rubbish products that you grab and add to your purchase without thinking. My daughters and I found that some products cost twice as much as the equivalent product placed on a normal shelf. The "forced 20m sweetie isle" that we are herded through like cattle is a long drawn out "Koop en loop" trap!

Impulsive buying is encouraged by retailers. The display and placing of products is an art on its own and merchandisers fight to get the best position or eye level shelves. That is why the highest turnover items are always placed at the back of the store and the slow movers in front.

[adrianh]

Impulsive buying is encouraged by retailers. The display and placing of products is an art on its own and merchandisers fight to get the best position or eye level shelves. That is why the highest turnover items are always placed at the back of the store and the slow movers in front.

That is very true - the cooldrink is always right at the very back of the shop forcing customers to walk all the way the way through to the back. I find that many shops don't show where the cool drinks are so you end up searching. Some shops dot different brands of cooldrinks on the rear facing gondola ends at odd places in the shop - Monster is at the one end, Dragon in the middle and Coke right at the back corner.

They also dot the gondola ends with ultra expensive complementary products - like the biltong right by the wine. I suppose if you are spending a couple of hundred on wine then another hundred on biltong goes without thinking.

Another trap that I fall into is this: My daughters and I stand in the row at the tills. I get bored very quickly so I ask them to wait while I walk around - I always end up buying food close by out of boredom. The odd can of cooldrink or packet of chips. I suppose one should go shopping with proper blinkers and earmuffs like horses are made to wear against distraction. :-) I must add that both my daughters fall into this trap too.

[Derlyn]

Go grocery shopping just after you've had a huge breakfast or lunch.

You then won't be interested in grabbing that extra packet of chips or cooldrink.

NEVER, NEVER go grocery shopping when you are hungry.

Peace out .. Derek

[adrianh]

Go grocery shopping just after you've had a huge breakfast or lunch.

You then won't be interested in grabbing that extra packet of chips or cooldrink.

NEVER, NEVER go grocery shopping when you are hungry.

Peace out .. Derek

Yeah....we always make this mistake. Its amazing the rubbish you buy when you're hungry.

[Blurock]

4. Price Appearance
The design of your prices can have a tremendous impact on how customers perceive the value of your product.
Fancy restaurants will most likely have prices in a smaller font and won’t have the added zeroes at the end. They’ll look like “190”, instead of “R189.99”.
The reason for this type of design is that longer prices appear to be more expensive than shorter prices, even if they represent the same number.
This is because subconsciously, the longer prices take more time to read. They also leave out the “R” sign for prices as it makes the price longer.
They may even leave out the price altogether. If you can afford a Ferrari, you don't ask for the price first.

Another tactic is to use a very small font for the 99c. A customer's perception of your pricing has a huge impact of how the business is perceived. You can change the perception of your pricing by adding an odd number, anchor prices, and a handful of other tactics such as fancy packaging. Most importantly you must convey the value of your product. Worst thing that one can do is to leave customers feeling tricked after their purchase; they may never come back and also post their displeasure on social media.

Some may see these techniques as taking advantage of consumers’ inherent mathematical and psychological weaknesses, while others may find them to be an essential part of everyday business. Look for these tactics being used on you as you go shopping. Don't be fooled!