February 22, 2023
There’s an extensive body of research that demonstrates that prices ending with a “9,” as in $8.99, drive higher sales volume than prices ending in a zero, for example. Pricing researchers call it “charm pricing.” The idea is that buyers read from left to right, and that first number “sticks,” you might say, and the buying decision incorporates that number, not the full price. Therefore, when a buyer sees “8.99,” their unconscious is registering “$8” instead of “$9.”
Some solo and small professional services providers, I’ve found, reference these “tricks,” as they call them, and help justify their decision to price the same way they’ve always done it.
There’s a little too much nose-in-the-air thinking going on with this point of view.
Here’s what’s missed: buyers are more prone to rely on an unconscious trigger like “charm pricing" when the consequences of a poor decision are low, such as if you’re buying a loaf of bread. If you make a choice you end up regretting, you’ll be back at the grocery store in a few days and you’ll buy a different loaf of bread. You’re not stuck with the expensive consequences of a bad choice.
The purchase of high-ticket professional services, such as accounting or business advisory, or legal services, is a different matter altogether. Buyers are much less likely to make a quick decision that relies on unconscious triggers. (And if they do, service providers, you might want to question whether that client is really a good fit for your practice.) The decision-making process that such a buyer goes through is much more complicated than pondering what loaf of bread to buy.
By the way, I’m not sure you’ll be taken seriously if you present engagement options to a sophisticated corporate buyer, let’s say, with “good, better, best” pricing options of $9,999, $24,999, and $99,999, let’s say.
For high-ticket solo and small professional services providers, the key to more effective pricing lies in defining where the client sees value, quantifying that value, and pricing to receive a small portion of that realized value. It’s value pricing.
Pricing your services using this methodology is not a “hack” or a “trick.” On the contrary, it might well represent the most ethical way to price, because you are attempting to correlate what the client pays to the value they themselves have defined and will receive.
Image created using Craiyon (Formerly DALL-E Mini)
(This blog post was also posted on LinkedIn.)
©Ray Business Advisors, LLC and John Ray
About me: I help solo or small professional services firm owners with the confidence and positioning necessary to improve their pricing and change the trajectory of not only their business but their life.
I have a podcast called The Price and Value Journey, which features interviews with industry leaders and audio versions of my blog posts. You can find the podcast on your favorite podcast app.
I also have a book coming out in 2023: The Price and Value Journey: Raise Your Confidence, Your Value, and Your Prices to Grow Your Business Using The Generosity Mindset.
For more information, go to PriceValueJourney.com