If you run a memberships or subscriptions model for eCommerce, you know how beneficial it can be for your business. To list a few benefits: a consistent revenue stream, customer retention & low cost of customer acquisition (CAC), better inventory management, greater opportunities for customer engagement, etc.
However, there’s one more thing you would’ve figured out running these business models – they’re not easy to sell month-after-month, year-after-year .
But there’s one tried and tested way that can help boost sales for subscriptions and membership models — psychological pricing strategies.
In this blog, we’ll talk about some of the most effective psychological pricing strategies that you can easily apply in your memberships and subscriptions business.
What does psychological e-commerce pricing mean?
Do you recall how you always get excited by the words ‘sale’, ‘discount’ or ‘buy 1 get 1 free’? That’s because there’s psychology at play. Psychological pricing are strategies that influence customers’ buying decisions.
And you have to use psychology for your ecommerce pricing strategies to entice customers to buy more. That said, your products, its quality, and how they add value to customers, are all important factors. But pricing strategies that play with consumer psychology can help a great deal to boost sales for your memberships and subscriptions.
Psychological pricing uses the decoy effect. Psychological pricing is all about playing on the consumers’ perception of the price. Whatever pricing strategy you use, its end goal is to make the customers feel like they’re paying less money, or getting more discounts, or benefiting from the price.
Whether it’s the way the prices are written or the format in which they’re written or the discounts, marketers of memberships and subscriptions businesses can try different strategies to figure what works for their Shopify store.
And so, we’ve put together seven effective pricing strategies that would be worth trying for your subscriptions business.
One of the most common ecommerce pricing strategies, charm pricing involves deducting an extremely small amount from the price (one cent). For example, $99 instead of rounding it off to $100. This simple change tricks our human brain into thinking the product is cheaper.
A study revealed that approximately 60% of prices in advertising material ended in the digit 9, 30% in 5, and only 7% ended in the digit 0. That’s how much charm pricing is used in ecommerce.
Moreover, when customers see something priced at $199, they subconsciously perceive it as a price that is in one hundred and not two hundred.
Charm pricing works well for memberships and subscriptions because:
- Customers usually buy subscriptions for items they need on a regular basis and buy repeatedly. And so, they think even a one cent price reduction can add up as savings for them.
- When customers join memberships and subscriptions of your brand, it means they already love your brand and products. These models build stronger loyalty. And when you offer them products at a lesser price, they feel special as these are special prices for them.
Here’s an example of charm pricing.
2. Odd-even ecommerce pricing strategy
Similar to charm pricing is another strategy that’s often used for subscription models for ecommerce —odd-even pricing. For example, $47 instead of $50.
The odd-even pricing strategy works for the same reasons for subscriptions and memberships that charm pricing works. Customers feel like these are special prices available in subscriptions and hence they find more value in purchasing it.
3. Playing around with price appearance
Believe it or not, the way you write the price of your product can influence your customers’ perception. For example, $10 or $10.00. Removing the decimals (zeroes in this case) makes customers feel like the number is smaller and that they’re paying less.
A study revealed that removing the $ or currency sign resulted in greater spending. It works as a psychological trigger as, in the human brain, it disconnects the price from the money, and hence, makes it easier for customers to spend. This means the price written is just a number to the customer, and not money.
Another way that eCommerce businesses experiment with price appearance strategies is by using different formats of writing prices, such as writing USD or Euro instead of the symbols.
Below are some ways to try these price appearance strategies in your subscriptions model:
- You could use this strategy when you’re introducing a new product of a slightly higher price in your subscription model inventory.
- When you want to push sales for an overstocked item and need it to sell fast.
- When you display your different membership plans on your website. Instead of writing the currency sign every time, you could probably write it once.
Here’s an example of price appearance as an ecommerce pricing strategy:
4. The eCommerce pricing strategy of price anchoring
Price anchoring is another effective pricing strategy that can be used for membership and subscription models for ecommerce.
Price anchoring works on the principle that customers tend to rely on a piece of initial information to make a purchase decision. For example, write $50 and strike it out and write $45 next to it.
This is an age-old pricing psychology, which is often seen in print ads, sales posters, on eCommerce stores, etc.
Let’s understand how you could use price anchoring as a strategy for your eCommerce subscriptions or memberships business.
Let’s say you have a subscriptions model for baby diapers. And you’ve launched a new diaper that is attracting customer interest. To generate more interest around your new product, you could try the price anchoring strategy.
You could say, actual price is $25,and special launch price is $20. That’s price anchoring! By writing a higher price first, you’re telling customers that the product is actually worth $25 but they can have it for $20 for a short time. You provided customers an anchor, a benchmark against which they’re comparing the $20 price.
Here’s an example that shows the visual and psychological impact of pricing without and with anchoring strategy.
You most probably have seen these words at some point while shopping — ‘Only today’, ‘Next 2 hours remaining’, ‘First 10 customers get…’ And you most probably made a purchase.
Ever wonder why you ended up making that impulse purchase?
That’s because urgency, loss aversion and fear of missing out (FOMO) cause psychological triggers in the human brain. Thus, prompt us to take quick actions.
Customers don’t want to miss out on good deals. Moreover, when there’s a time constraint, it builds a sense of FOMO.
Using urgency as a sales tactic is common. And it can be applicable to membership and subscription models for ecommerce, too. Here are some ideas:
- Offer special first-access to your sales to membership customers, but for a limited period only.
- Create urgency by running flash sales for your subscriptions. For example, buy a new subscription at 50% discount, only today.
- Use the urgency strategy when you launch a new product in your subscriptions. For example, 10% off for the first 5 buyers only.
Here’s an example:
‘50% off on two items’ or ‘buy 1 get 1 free’ — which one would you go for?
Studies have revealed that the majority of consumers choose the second option – buy 1 get 1 free.
The reason? Because even though the two offers are the same, consumers are not able to recognize the play of simple mathematics. This is known as innumeracy.
Innumeracy is defined as the condition of having difficulties with figures, statistics, and visualizing distances. In this condition, people have trouble performing mental calculations.
This strategy takes advantage of the simple situation that customers are unable to recognize a basic mathematics trick due to mental inertia. Thus, brands can make customers go for the deal that’s more favorable to their business.
You must have seen the below example in magazine or newspaper subscription ads:
Web-only subscription – $50
Print-only subscription – $120
Web and print subscription – $120
If you were to pick from the second and the third options, you’d obviously go with the third one. Because why would you choose the second option if you’re getting more for the same price in option 3. Right?
In the above example, the second option is what is called useless pricing.
In this strategy, you’d find completely useless pricing options written just before the most favorable pricing options. This makes customers instantly go for the option that’s most favorable to the brand. Of course, without realizing it.
When you use this strategy for your subscriptions or memberships business models, you can navigate customers into selecting the option that you wanted them to pick all along. Example:
If you were asked to spend $1 a day or $365 for the year, which one would you opt for? Most people would go for the first option.
Even though the amount you’d be spending is the same, you’d compare both on the basis of what you have to shell out now with what you could do with $365 currently — maybe buy a phone or new sneakers.
Another example of how brands play with customer perceptions around pricing could be, for example, giving a different name to a product. For example, you name a coffee after the estate where the coffee beans were grown instead of calling it Americano or Espresso. That way, you’ve given customers a product for which they don’t have a reference for pricing.
Pricing can create positive or negative emotions in your consumers. And so, to apply a pricing strategy successfully, it’s important to improve the perceived value of your products when you want to play with customer perceptions.
But of course, the answer is an affirmative yes! With so many benefits and potential to boost sales, why should you not?
The best way to go about it is to use the psychological pricing strategies that are relevant to your business and products.
However, there’s a catch. To be able to set up and manage these business models, you need to have efficient subscription and membership tools such as Appstle. You need to be able to analyze the impact of different pricing models and iterate and pivot as needed.
Appstle Subscriptions and Loyalty and Appstle Memberships and Loyalty apps can help you set up and manage your business models. Appstle apps are designed to help you with eCommerce pricing strategies that boost engagement and sales.