Episode 92: Psychology Behind Pricing: How Numbers Influence Sales

Welcome back to The Pursuit of Badasserie: The Podcast… SEASON 3! In this episode, we are talking about one of our favorite topics–SALES–specifically, the psychology of sales. We are focusing on how numbers, pricing, and perceived value can dramatically impact your bottom line, AND how this might affect your holiday sales season. You’re thinking about the holidays in August, right?!

Let’s get after it!

In this episode, we discuss:

Understanding Your Numbers: We discuss the importance of knowing your pricing structure, costs, and return on investment to avoid the common pitfall of thinking you’re making a profit when you’re not.
Perceived Value and Pricing Strategies: Learn how to create perceived value through strategic pricing and language, using tactics like the decoy effect and price anchoring to influence buyer decisions.
Emotional Triggers in Sales: Discover how to tap into emotional buying triggers and why understanding your audience’s emotional and cultural psychology can enhance your sales approach.
The Power of Bundling and Subscriptions: Explore how bundling products and offering subscription models can increase perceived value and improve client retention.
Price Anchoring and Decoys: We explain how anchoring with higher prices can make subsequent offers seem like a better deal, and how decoys can guide customers toward the purchase you want them to make.
Round Numbers vs. Specific Pricing: Learn why round numbers work better for emotional purchases, while specific numbers can enhance perceived value in high-ticket items.

Takeaways:

Knowing your numbers is crucial for profitable pricing.
Perceived value can be influenced by language and presentation.
Emotional triggers are key in converting sales.
Bundling and subscriptions can improve customer loyalty.
Use price anchoring to strategically guide purchasing decisions.

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Read the full transcription of this episode below:

Lynn Howard

Hey, I’m Lynn.

Amanda Furgiuele

And I’m Amanda. Welcome to the pursuit of badasserie: the podcast. We are back again and we are talking about one of our favorite topics, which is sales.

And today we’re going to discuss the psychology of sales and particularly the psychology of numbers. numbers and sales, and how we adjust our pricing to get the best results, basically.

Let’s talk about sales.

Lynn Howard

Let’s talk Well, you also love numbers. So this is like right up our, right up our, right up our jam.

Yeah, you know, there’s so many different things that we could actually kind of discuss underneath this umbrella. But one thing that I want to start with is looking at, let’s start with the basic, like looking, understanding your pricing structure and kind of your pricing period, because a lot of entrepreneurs don’t understand their pricing.

But understanding pricing structure, as well as the, your return on investment and your costs, the value, all of these different things is really going to help give you the proper baseline and foundations to be able to make the choices in how to have the best psychology of sales and so make a profit.

So many, many times, Amanda and I go into going to working with clients, especially those that have some kind of product, and they’re either breaking even or losing money or barely making any money.

They think they’re making all this money, but they’re not when they factor everything else in. So before we even jump into some of the points we want to discuss today about the psychology of sales is understand your numbers.

Do an basic sell sheet cost analysis of this is exactly how much it costs in product, in services, in labor, in shipping, in taxes, all of that.

So you know your wiggle room to be able to price it accordingly.

Amanda Furgiuele

I’m kind of smiling over here because I don’t know for our listeners who has ever watched any television show, but one that comes to mind is parks and recreation.

There’s this scene where he talks about the break evens and like oh it’s super fun. to do the break even.

It is super fun to do the break even. I know that sounds super geeky, but finding out what your break even prices is fun for me anyway, because I made this mistake for years.

The idea that you have this number in your head, okay, if I paid $10 for it, and I’m charging 20 that I have this great profit margin, no, you don’t because you didn’t factor in the tax, you didn’t factor in the shipping, you didn’t factor in discounts that you did, you didn’t factor in your time, your effort, all the things that you saw.

You didn’t pay yourself. And so when you look at the actual amount that you end up making, it’s so a tiny, miniscule tiny that you don’t realize how much you’re actually losing ultimately, not just in sweat equity, but in actual real dollars.

And so when we talk about understanding your numbers, we do really mean it from a very basic standpoint. This isn’t a hard, difficult mathematical

equation. It’s literally doing thinking about everything that comes into play when it comes to doing your numbers. How much did it actually cost?

Not just in the cost of that, particularly like a product, but in all the things that come with it.

Again, taxes, shipping, your cost in time, your effort, your energy paying yourself, paying your employees, paying the credit card processing fee, like all those things trickle down.

And that can really make it a huge effect on what your bottom line profit is, because I know that Lynn has had this issue many times with clients, not personally, maybe even personally in her previous former years, but understanding that you can do all that math and realize that you’re actually losing money with every single sale, and that hurts in a really, really raw way.

It hurts to realize that you’re losing money on every single sale, even though you thought you had this huge profit margin that when you actually do the numbers, it doesn’t work out well.

we want to talk a little bit about avoiding that scenario, because we want you to make money. Nobody got into business, unless you’re a charity, you didn’t get into business to do charity work, okay?

Lynn Howard

You got into charity, not all are like they make money.

Amanda Furgiuele

In fact, they make a lot. have, I have worked for charities. You make money as a charity because you have to.

how you get things done.

Lynn Howard

Absolutely.

Amanda Furgiuele

Money does make the world.

Lynn Howard

so some points around the psychology of sales. After you understand your baseline, now you can make an educated move to be strategic.

So one of my favorite is perceived value. Perceived value means that you are, you’re showing them the value of the product or service, and you can do this multiple ways.

But one of the ways that Amanda and I actually just did it was, and we do it often in our, I should say, we do it often in our

our business is when we’re launching a program we’re going to show all the different price points at its cost or excuse me at its charge like what we would charge all the different price points of all the things that you’re getting inclusive so we can chalk it up to you know the perceived value is $15,000 but you’re getting it for just $19.99 type of thing so that perception of like but it has to be palatable so it has to be perceived value in your potential customer’s eyes not necessarily in your eyes so it’s also the way you word it and different things of that nature but perceived value helps play a huge role in converting now another aspect to that is the return on investment that they’re going to receive so instead of selling them benefits and features you’re actually going to paint the picture of what problem like Amanda said what problem that you’re solving with this and

So that’s also painting the perceived value kind of aspect of psychology of sales.

Amanda Furgiuele

There’s a few different facets to this one. Absolutely, and perceived value is important for all the reasons that Lynn mentioned, ultimately, and ultimately, when you’re trying to sell something, the language you use can also be affecting how people perceive that value.

And yes, it can be as high scale as the elite language you use for a high value item versus a lower end item, but even using things such as for only the low price of blah, blah, even if it isn’t the low price considering, but putting that perceived language into the customer’s brain of it’s only this much or it’s, you know, for the very low level of weight, there’s more.

There’s lots of things that people say that gives you that perceived idea, that language Can implant in your brain from a psychology perspective and give you the idea that you Are getting value even if it’s not this huge value to not saying that you want to do people That’s not what we’re saying here But the way you say something has an effect on whether or not people perceive value and even if it’s the exact same price by saying something Oh, it’s 20 bucks or sitting up.

It’s only 1999 It’s one cent difference But the way you say it makes a big difference in how your audience perceives it.

So I Know it’s an extreme case, but just that one little Change in inflection and saying oh, it’s $20 like oh man.

like it’s 20 bucks Like I don’t know if you could afford it, it’s 20 bucks or saying oh, it’s only 1999 Anybody can afford that.

This is such a great deal It’s the same price basically one cent difference But it the way you say it makes a big difference of the language you’re using that price point you’re using

the perceived value that you are inferring or suggesting makes a huge difference and how your audience reads that sale.

Lynn Howard

You actually, in that you mentioned two other points that I know we’re going to cover, but I want to kind of flow into the emotional side because the way she words are powerful and you want to make sure that you’re speaking in your potential prospect rules language, not in your language.

And so not language as an Italian English tie, but in the way that they would speak. So if you’re dealing with really highly educated, very upper upper class individuals, there’s a different language that they typically use than somebody who’s from the streets.

let’s be honest. It’s like for real. So I don’t really get along with those high class people don’t really relate.

Anyway, not saying I’m from the streets, but you know, you know, you know, any who move it along is the, it also evokes an emotion and they feel a part of it.

So it’s not putting the little red flags. Emotion, using a emotional, emotion language or things to trigger emotion language, even in the perceived value kind of aspect, is going to help people buy on emotion.

And that’s especially important during holiday seasons, right? But anytime, like it’s super important at all times, using the emotional cues.

And I’ll never forget when I was, I went to a speaking event and I wasn’t a speaker, but it was a big conference.

And the whole time, and essentially, I was going to see how they worked the front of the stage was when I was first used a story a few different times, but there’s different aspects to it that why I share it.

But my task was to watch them at the front of stage and how they operated the room and how they sold the product or service, the program, that they were going to try to convert the people in.

was probably 500 people in the room, more, I don’t know, but the people from the stage were selling it from a scarcity.

point of view, the emotions that they were pulling on was scarcity, fear. That is not my type of selling.

And I remember having this conversation with my girlfriend who was my coach at the time, was like, these are not my people.

And we were talking it through. I don’t, I don’t mean, it’s like, okay, that means that the audience that would be sold in this manner are not my people, at least not yet.

Because if they need to be sold on that scarcity way, I’m not their person, because they’re going to be living more in victim mode, to be gleaned more in fear, more in scarcity themselves.

And that’s just not going to be my my people. So that emotional, the psychology of using emotions to trigger that sales aspect in that conversion, like them actually by is going to play a huge part in it.

Amanda Furgiuele

And you’re speaking of emotions. And I know I wrote about this in both the first and second book. particularly in our second book about the emotion behind purchasing that people buy with emotion and justify with logic.

So when it comes to pricing from a psychology perspective from around emotion, and this is a generalization, I will acknowledge that, but round numbers tend to work best in emotional purchases.

And what I mean by a round number is, you know, $10, $25,000, like a round number versus like 24 or 38, like putting the actual value of something, what you consider is like the tax number, or like, this is the number it’s actually valued at 24, 78, that’s such a weird number.

If it’s an emotional purchase, they’re more likely to buy if it’s a round number. So if you’re looking to price things and you’re if that weird kind of in like in the middle number, it’s best to round up around, well, always round up, don’t round down, don’t run down, don’t run don’t down, don’t run down, round up within

then even still like rounding up is going to get you a more emotional purchase. However, I will say that within that emotional purchases and this again, it’s a little bit nuanced in the psychology and I say this because I took many a course and seminar on the psychology of pricing.

You’re also going to get a lot of positive feedback on shifting the left number. So instead of being like $3.60, it’s $3.59.

It’s just shifted over by one penny. It’s the difference between $20.99. That slightly lower decimal point, even if people just perceive it.

$19.99 just sounds better in someone’s psychology than $20 and I know that It’s so like when you think of it from a standard normal person, like that sounds so dumb, like it’s one-cent difference, but I will tell you a thousand times over, I will absolutely sell something that is $29.99 more than I will sell something that’s $30.

even though that’s not a round number, it’s the idea of shifting the decimal point to change the perceived value.

Now again, there’s a difference between a high-end sell, like if I’m selling a car or a house, like same selling a house for a very cheap house at this point, for $300,000.

Someone’s going to be like, oh, it’s $300,000. It seems a little strange to me that it’s such a round number because it’s such a large investment.

Now, instead, I said it was $312,638. You’re actually more likely to sell at that number because the value at a higher number, people are more willing to spend a higher amount and the round number becomes suspicious and they think that you’re

translating the number. So I know that sounds a bit weird, but when you’re at a higher value, when you when you’re selling something that’s at a higher price point, it’s easier to sell it at a more A fluffier price, a fluffier price or like a less round number because people again, they’re not looking for the round number.

They’re looking for more perceived value in there. If they’re like, Oh, well, it costs $312,000 because that’s what it’s worth versus rounding it off to 320,000.

It’s getting translated for no reason. What’s what’s wrong with it? Yeah. So knowing your the psychology around your audience, because When you’re selling to someone who is buying at a price point of a much higher price point than a lower price point, it’s going to change a little bit of your psychology around it.

So Knowing that difference is going to be a bit of a fine line for some people, but ultimately When it comes down to your pricing, you want to know the psychology behind your

specific demographic.

Lynn Howard

Because selling something at $5 is very different than selling something at $50,000. Yeah, that is heuristic. As I always say, I always say that word wrong, but price heuristic where it’s higher price, better value, like it’s kind of like keeping up the Jones’s mentality type of thing as well that you can get away from or get away with.

One thing I do want to audience is know your own cultural psychology of numbers. In some cultures, four is not a good number.

So you don’t want to have fours in your number, threes are lucky numbers. So sevens or whatever. So make sure that you know your own audience psychology and demographic.

So you can make the tweaks because it absolutely will help you also with pricing psychology and strategy.

Amanda Furgiuele

And I would also say reduce the amount of numbers. So when you’re looking at your marketing and advertising, instead of putting something is, if it’s for, let’s say it’s $100, instead of saying $100, $100,.00, take off the $0.00, nobody needs to see the decimal point, because the adjusted consciously makes them think it’s costing more.

That’s why $99 works better, so much better than $100, it’s just one extra place marker. So, if you can take out that 0.00, that comma, just take it out.

If it’s not needed, take it out, because that extra number is going to make them think it’s larger, even if it’s not, because looking at $100, or $100.00, it’s the same number, but let me tell you from a marketing and advertising standpoint, it makes a huge difference in what converts to the actual sale.

Lynn Howard

Absolutely. Another thing that is effective are price decoys, and so a lot of times what you’ll do is you’ll offer, and this can go into the perceived value as well, but let’s say you have-

two products and services or whatnot that are the same. And then you could do a price sequence that’s about the same amount of price, but less value or a little bit less, but they’re getting like dirt cheap.

So you can kind of bump them into the next tier. That’s why a lot of people do like the three offers in a pricing structure or in a pitching structure, especially in service based industries because the majority of the people will go for the middle tier.

When you offer two, it really depends on how you lay that out to be able to get them to the upper tier, otherwise they’ll always buy the bottom line.

Again, that is somewhat market specific, but it’s also like pitching specific and kind of your layout specific, but overall generalization, that’s why the whole decoy effect is most people aren’t gonna buy that bottom tier because you don’t get as much.

You wanna build the most value in that middle tier if you have three, so you can kind of push them there.

And the, the jumps from one to two, if you have three of them, the jump from one to two might be a little bit bigger than from two to three.

So two to three will be less more of a jump, usually, and they get a little bit more of it.

You’re trying to hyper-focus in on these two as you go to where you want people and also comes down into price anchoring.

Amanda Furgiuele

So if you’ve ever heard about the concept of price anchoring, so people tend to rely very heavily on the initial piece of information they get.

So if they see that your introductory offer is $1,000 or $10,000 or whatever, and then they see that your next point is only $99,000, going to see this, they’re like, oh my god, it’s such a huge deal.

Of course, I’m going to get that because their perception is that the best steel you have is the higher price point.

And so anything below that you’re mentioning becomes a deal versus just like the cheaper option. Whereas if you start with the lowest price offering is five dollars, everything else seems inflated.

So knowing that you’re if you anchor your audience in this is a higher price, this is the item I actually want you to buy at this price.

If they end up buying something cheaper, it becomes more of an economical value based item that it’s it’s the other item is it’s exposing you to a different part that you might be offering, but also it’s giving a better understanding of how they’re seeing the anchor of your pricing.

So I almost always leave my higher offer and then downsell versus starting with my lowest offer and trying to upsell people because it gives it.

Yeah, you’re you’re leading into a different audience. You want to lead with the idea that your value is higher.

that you’re worth that much and you have more economical options but ultimately you’re anchoring them with the idea that this is my normal standard price of X and we also have YZ available here at this price point but you want to start higher rather than starting at your very lowest and hoping people will give you more.

Lynn Howard

Yeah it’s easier to take things off the table and walk them down that is add things and walk them up.

So 100% absolutely love that. Just a couple other things that help with pricing that kind of fall underneath or not kind of but they fall underneath the pricing psychology of pricing is like the idea of bundling or subscriptions are really great because people want again this goes back to perceived value that even those that are wealthy especially those that are wealthy too they are a lot of them are very frugal so they want to feel like they’re getting a deal frugal certain things not frugal other things but they want to feel like they’re getting a deal they

want to feel like they’re part of something and actually the subscription part in the pricing of psychology, there’s a couple of different things to that that I feel is really of value.

Again, we can probably talk a whole hour on that just in itself. But one is subscription. The psychology side is to already paying every month for a low amount, right?

So even with coaching clients where I could take off the money upfront, I prefer monthly because it’s easier to convert them into a longer term because they’re used to paying that out every single month versus getting another chunk of money.

They feel a part of something. So how many of you have subscriptions that you feel a part of like the Netflix club or the this club or the that club and you feel a little bit more in alignment but also because you’re so used to paying every month, you sometimes forget about it and don’t use it.

We don’t want people not using our products and services but it just becomes an extension of it, just becomes a part of.

So the subscription, the psychology behind and again, I’m very superficial, like in the, how deep we can go with that, the subscription side, the psychology base.

But it is, it definitely adds to your, they feel more of a valued customer because they have something that maybe not everybody can have.

They get priority, like there’s all these different things. So it helps with client retention, subscription based models, you tend to have them longer.

It’s, it’s really interesting. But also, like, it also is the agreement of the subscription. And that’s a whole other thing.

still, like subscription based and bundling, bundling again is like where you get all of these, like buy this and then, you know, buy a lot of things from IRB because I live in Thailand and I want to get like certain products.

And even like, with IRB, they said, okay, you you bought this, but a lot of people buy this and this Amazon does it.

Okay, you bought this, a lot of people who bought this also looked at this or also bought this, right?

That’s the bundling aspect that’s kind of the upsell, the add-on sell. So, Um, there’s a whole thing around that.

Oh, I want to be like other people. But also, um, oh, you’re, you’re, you’re hearing my needs, right? When the bundling kind of aspect happens, people think you’re hearing their needs.

Amanda Furgiuele

Yes. And I know we’ve mentioned this before, but I wanted to circle back to it because I think it’s so important that as a business owner, you need to understand not only your product and or service, but also your demographic.

what I mean by that is one of the best psychological, I’ll call the trick that I use and have used for 25 years in pricing is when you know your audience and what you are selling, you can really work on emphasizing price or product.

For cheaper products, you can emphasize the price. This is such a great deal. show the price. the details around the product, and this is emphasizing that economic value of the product before that I really worry about what the product is itself.

But when you’re selling a luxury item or a very high-end item, you’re going to do the opposite. You’re going to present the item in the lifestyle and the solution that it offers, and then make it an extra effort that they have to go through in order to see the price.

really, you’re emphasizing and you’re prioritizing for the buyer the quality of the product over the value of the product, because at that price point and that demographic, it’s not really about the price, it’s about what that product is and what it means and what it will do for you and what it will create for you.

So again, that concept of price and it really is important that you know and really truly understand the demographic that you’re working with.

Like, who is your target audience? And what is it you’re selling in? One of the great examples of this is there was a, the one I think of right now that I worked in PR for long time.

So one of them is this luxury cat litter, okay? So it was a cat litter. cats are pooping on this rock, okay?

It’s cat litter, okay? And the client wanted to reduce the price because they’re like, oh, well, all of our competitors are at this price.

And we’re not selling enough. So we should lower our prices to try to increase the selling. So they’re trying to get more clients by lowering the price.

Instead, what ended up happening in this company is they doubled the price of their cat litter because it was a luxury cat.

And if you really care about your cat and you have a luxury cat, you’ll pray this extra price for this luxury cat litter that changes colors based on the type of urine they’re having.

And then you’ll know more about your cat and you’ll care. about your cat and you are a better cat owner and they tripled their stock in a year.

was ridiculous how fast they were able to change it because they shifted the perspective of it. They don’t want cheaper, they don’t want more, they want select people who are willing to pay double triple the price on this specialty luxury cat product and it was a very specific niche but again they understood their target market they weren’t going for the people who were looking for the cheapest cat litter they were going through people who were looking for luxury cat litter so that’s a thing folks that’s a thing so if you think that you can’t sell your thing luxury cat litter something absolutely and I will say and this is not to back on the luxury industry but I can guarantee like there’s been a lot lately especially lately I’ve seen a lot of like where the luxury industries being called out about like how they’re selling that bag for $10,000 but only cost them 500 bucks to make and

Lynn Howard

And that same manufacturer makes things at the $20 marker, So like, it’s just because a little bit of, but it’s the brand name and it’s how you present yourself.

so that’s all about the psychology, I mean, marketing, the psychology of marketing as well, but it’s also about the psychology of pricing.

And so I love, I love that example because come on, cat litter, like cat litter. Anyway, we can go on and on and on.

I think that we are at time, we should probably wrap this up. We hope that you got some nuggets out of this.

Amanda Furgiuele

Yes, ultimately, when it comes down to psychology, as it comes out with any psychology, it’s about getting into the head of your people.

And a very nice, I feel like in a one of my people, in a bad way, it’s not I’m just ultimately psychology is about looking into things, like really diving deep into the psyche of your audience.

And that’s what knowing your target market is. So it’s not manipulative. It’s not creepy. It’s knowing your people. So when it comes to really thinking about the psychology of the sales and how you price things, it’s about knowing your target market and what they need and what they expect and what they’re looking for.

And then you can tailor your offers and really speak to your target market. So it’s, psychology of sales doesn’t have to be scary.

It’s really ultimately about knowing your target market, about knowing who you’re talking to, who you’re selling to, who you’re trying to provide solutions for, and it’s going to be okay.

Lynn Howard

It will be okay. All right. So share this, subscribe, give us a comment. We’d love to hear from our audience.

What’s it out to you? What other aspects of the psychology of pricing?

Amanda Furgiuele

Again, we could have spoken about so many different things.

Lynn Howard

But what has stood out to you and what questions do you have for us? Go ahead and hit us up in the comments wherever it is.

Yeah.

Amanda Furgiuele

I, yes. So if you have any questions, make sure you are following, subscribing, and then ask those questions because we are happy to talk sales all day long, grab the book, and then we’ll talk some more about it.

Lynn Howard

Yeah. And share this. Share this with entrepreneurs and small business owners that you know, because even if we know our numbers, we don’t check our numbers enough and we don’t analyze the market transmitting, we talk about market trends and the sensitivity of that and different things.

Like, there’s so many different things, but you definitely are always wanting to keep one hand on your pricing to understand where you’re at, the pulse of it, the pulse in the industry, et cetera.

So share this with somebody or many people that you know that could use just kind of a refresher of reminder to kind of check with their pricing psychology is and what they’re doing about it.

Amanda Furgiuele

All right. Until next time, get after it.

Episode 92: Psychology Behind Pricing: How Numbers Influence Sales