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Everyone knows that you can easily drive off a customer with a bad price, but did you know you can lose sales on a great deal simply by how you present it? Economists, social scientists and behavioural psychologists have been studying how ordinary people interact with each other and make purchasing decisions for decades, and some of the results have surprising implications for website design.
Politicians are often asked to prove they know the cost of a pint of milk, as a way to prove they’re in touch with ordinary life. However, research suggests that even experts don’t have a clear way to judge what something groundbreaking and new is worth as humans primarily judge price by comparison to similar items. This means that when something novel, like the iPhone or the app appeared the inventor had the opportunity to anchor the price at a particular point – the iPhone went high, apps went low, and the world accepts that now. This suggests that even if you want to offer a low introductory price for a new product or service, you should put the higher price you’ll be charging later in a large font “worth £1,000 – introductory special £9.99”.
We shouldn’t need to say this but let’s be totally clear: while some of our examples (like the last one) may be exaggerated for effect, it is, of course, imperative that you don’t lie, cheat or deceive your customers because that’s morally wrong and also illegal.
Knowing that people judge if a price is good value by comparing them to the nearest available somewhat similar product, it’s no surprise that having a range of options can increase sales. However, sales may occur in some surprising ways. For no matter what the actual serving size of the options, from ice cream to sun cream, coffee to car rentals, faced with 3 options and little other information, most people will choose ‘medium’. Many coffee shops use this tactic.
Some businesses have even raised prices by adding an ‘extra large’ option and quietly dropping the ‘small’ – regular customers still get a ‘medium’, everyone else is now buying a ‘large’. For website designers, this suggests that offering multiple options on a single page can be more effective than giving each product its own page. It also suggest that a website design where direct comparisons are easy can boost sales generally, although this will depend on the product.
The phenomenon described above is known as ‘anchoring’ and the surprising news is that almost any number can act as an unconscious anchor. As an example, in the book “Small Change” behavioural economist Dan Ariely describes an experiment where participants were asked to write down the last digits of their social security number (effectively random) and then say how much an item was worth. That there was a correlation between the two should surprise everyone, as there’s no logical reason for that. The implication for website design is that you should be aware of which numbers are prominent on your sales page – if your website was called Hampshire20 and your products sold for £30, they might seem expensive.
Everyone likes free stuff, and no one likes overpaying. Free is a very strong anchor point, and it can be difficult to get people to pay for a product which has previously been free or which they expect should be free. Apps and websites suffer from this phenomenon a lot as we have all been conditioned to expect digital content to be free. As a result, while offering free samples can be tempting, it’s sometimes counter-productive. For example, imagine your business was selling maps of Hampshire – best restaurants, best walks, historic landmarks… – you might think that offering a single map (“10 family walks in Hampshire”) for free would increase the chances of a customer buying a map, and this may be true but it may also set an anchor price of £0 for some people (i.e. “I got a free digital map, maps, like apps, should be free”). As web designers, we should therefore be very aware of where we use the word free and what we offer for free.
We’ve mentioned the need for data driven decisions regularly on this blog, and we believe it holds just as true for pricing, particularly when conventional wisdom is in conflict with new research or simply not performing well. Thankfully, website design is the ideal testing ground for many of these ideas as it is very easy to set up multiple pages or multiple products using different strategies, gather data and assess what works for a particular market or situation.
At boxChilli, we’ve been gathering data and analysing it on behalf of our clients for over a decade, giving us a wealth of practical experience to compare with the grand theories provided by both conventional wisdom and cutting edge research.