Use Decoy And Denomination Phenomenons To Price Your Products More Effictively

How To Price Your Web-Apps Effectively Using Psychosocial Phenomenons

Pricing strategy and tips for startups

What’s up guys, so I’ve been doing a ton of research on how to price web-apps more effectively

Now we know the rule of business. That is if you want growth, there are two things to keep in mind:

Margins and Sales

Without high margins you’re gonna have a real hard time

and with high margins, you would be able to afford to buy media more effectively, test new things and so on.

But also, you need to have an adequate amount of sales, to make this work and if your margins are low, you can only do so many things to boost the sales.

So the question that we have now is how do we sell high margins products and how do we get people to take advantage of it?

And also how do we increase our margins or revenue per customers if we don’t wanna increase the price of our front end product?

Well, there are two things that you can do:

There are two psychologically proven phenomenon that have been tested countless number times by many businesses in the past 50 years.

Decoy Effect: Which is a phenomenon in marketing where people change their mind between two choices if you present them with a third choice or option.

Example: Offer two sizes of soda and people may choose the smaller one; but offer a third even larger size, and people may choose what is now the medium option.

How can you apply this?

1. Have a free plan, basically give your users a free plan with limited option.

2. Then have a paid plan, and then a super premium plan and then a custom one that you can use my consulting strategy to sell for ultra high margin. You can learn more about my strategy in this article.

Why this strategy works really well? 

-> First, your free plan could be your leadgen strategy, which combined with other methods like giving away a free report, video training etc works really well.

-> Basically your report shows how to get X results. And your report is just a guide on using your web-app to get the result you promised.

-> Then to these people you can present an option of a simple upgrade and a super premium upgrade. (like lite plan costing $49 a month and super elite for $75 with a ton more features. This way you can break even on a big media buying campaigns and increase your margins by applying a disguised decoy effect strategy.

Okay now next step is to combine this strategy with another psychological phenomenon to really crush it.

The Denomination effect: People are less likely to spend large amount than their equivalent value in small amounts.

How can you apply this and why this works?

1. Upsells and Downsells: Use addons, additional products as an immediate upsell. So as soon as they buy your plan or upgrade, give them massive discount on an addon pack for your existing product or give them some other product which is directly relevant.

They they say know, give them a downsell by making that deal even more lucrative ex: through in an additional bonus or adon etc.

Important note: do not upsell them anything irrelevant or anything pricier than your main web-app.

The add ons or upsells should cost less than your front end, we’ve tested that people tend to get pissed and conversions on upsells (take rate) declines a bit. It may work well in other niche like info product. However I would suggest doing a pricing test.

Ex: if you’re selling a suite, people might be interested in new ties, shoes that goes on with the colour they selected or cufflinks, NOT a trench coat or a luggage. 

2. If you have an a fixed price product then offer a payment plan: Let’s say you are licensing your source code using my licensing based sales strategy. Obviously you’ll be charging a lot more if you’re using this method to your clients, usually its easier to close them by giving them an option to use a payment plan.

In our case we also use upsells for high ticket items, often they goes like a custom training center for their members or employees, or custom membership site that THEY can sell, or something like that. And since we use consulting to sell them licenses, its much easier to analyze and come up with a custom upsell offer which they are MOST LIKELY to take.

You can learn more about it here.

Use apply these techniques to increase your revenue per customer.

If you like to learn more of these psychosocial phenomenons and if you are interested in getting a tested and proven step by step guide to deploy them in your business, then check out our startup pricing strategy guide on Zielix® Marketplace.

 

 

SOURCEDecoy Effect Case Study
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Wayne Harrel is the founder of Zielix® Incubator, Hudson Lockwood Capital Partners and I Fired Wall Street trader’s community. Wayne like video games, technology and is a productivity freak.

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