How to boost profits using Behavioural Science
What is the one of the key factors when trying to boost profits?
Pricing is key for any product or service with such competition in the market. A lot of factors are taken into consideration such as our emotions and the prices set by competitors. In order to boost profitability understanding behavioural science is an important aspect.
The perfect price?
Emotions can play a big role when make purchasing decisions. For example, when buying milk at the supermarket, you might buy the $2 budget brand bread compared to the $4 Tip Top bread. This is because you think that the $2 is a fair price for that quality of bread and go for the cheaper option.
In order to make those decisions, we compare everything with its price and quality.
So how can businesses consider emotions when setting prices? We need to think from the customer’s point of view and what they see as a fair price for a product or service. Of course, this depends on many aspects.
Knowing your competitors is important. Customers are always looking for lower prices and you need to know who they are comparing your products or services with. Competitors in accounting range from local firms to online firms. By knowing what prices competitors are offering, it will help you set a margin, attract and maintain a larger customer base. Bundling services is a great idea as it offers customers with all the services they need, but you can get more customers by unbundling these services as some customers may only want one specific service.
Now you can set prices in order to increase profitability. In order to create different price points and be different from your competitors, you need to make use of pricing methods such as Goldilocks pricing.
Goldilocks pricing is when the middle option is favourable for customers. Customers can divide themselves into different spending levels. For example for a bank, you can offer a free account, and provide features for extra value. Customers will lean towards the free account at first compared to a $5 option. When a $10 option is introduced, customers will lean more towards the $5 option. Thus it raises the average price of the product or service as you tend to opt for the higher valued product.
For any business to be successful, they must provide customers with the best solutions and help them make decisions.