Understanding Price Psychology: Product vs Service
Deciding whether you're a product or a service-based business is KEY in deciding your pricing strategy, I am not saying this will necessarily change anything, but it may affect your approach.
In my previous conversation about price psychology, I shared the key steps to help you decide whether you’re a “LOC priced” company or if you want to price based on value, as that is the first, and most foundational step in deciding your pricing,
The Next Steps
From there, your next step Is understanding which pricing strategy is right for you, as there are many to choose from.
Product or Service?
Before we do that though, we need to figure out whether you are a product or a service-based business?
Now, I am not saying this will necessarily change anything, but it may affect your marketing approach.
What We Can Learn From Apple
Take marketing guru Apple for example, they are a product-based business but they approach it with a hybrid business model, as both product and service. So, really these are guide inspirational guidelines if you will. Truly, the skies the limit.
Let’s first look at a product-based business. This would be a business where you have a physical product that you sell.
For this type of business, you would want to develop a strategy where you would be selling, not only the main product, but would have one, or ideally, several accessories or upsell options available for the buyer, that help enhance their experience with your product.
Again, consider Apple’s approach here
If you go to make a purchase from them, you will be offered a variety of lower priced accessory items that will, in fact, enhance your experience with the bigger purchase. When making a larger purchase, like an Apple device, it would make sense to want the full experience and protection available, so you give little to know thought in adding those additional items to your cart,
That, right there, is price psychology. No one forced your into that purchase, or tricked you through clever wording or secret add-ons. They just presented you with the offer at a time when you were in a “buyers mindset” and the offer made sense for you.
So, What If You’re Service-Based?
If you are a service-based business, you will want to create several packages. The magic number here is usually three…
When you give only two options, you can often lead people to a “bottleneck of sorts in their decision making process and the delay in choosing from either. If given too many options, people will become overwhelmed and confused.
It’s All About Strategy
There’s so much to learn! Come listen to the full video I did on Product vs Service.