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How to choose the right price

right price

In this article we will consider a very important question: how to choose the right price from the point of view of neuromarketing? Let’s start with the theory, and finish, as always, with the possibility of its application in sports.

Make sure you read other articles of my blog. At least think of the irrationality of a human being and of the manner the thinking of the representatives of our species is divided into the conscious and the unconscious.

It is on this division that the difference in perception of the price depends. Let’s consider the cases of effective application on specific and simple examples of price formation.

As Monica Wadhwa and Kuangjie Zhang clarify in their study for the Journal of Consumer Research, it is important to realize the purpose for which a certain product is purchased.

$50 is the right price that should be set for an emotional purchase, as well as for a purchase that does not involve rational choice. That is, in cases when the choice is made by the unconscious. Then, the easier it is for the brain to process the figure, the better. Example: expensive alcohol, an exclusive element of decor.

$47.91 is the right price that fits perfectly for a purchase, which is expected to have some professional qualities. In this type of price formation, choice is made with the help of conscious thinking (clarification: “with the help of conscious thinking” does not mean “through conscious thinking only”). It is this “complex” price that gives the product an additional characteristic of professionalism. Example: engineering calculator, professional household chemicals.

$1.99 versus $2 is what many read this article for. It’s pretty simple: $1.99 has viability, when you know that a product (even if it’s a TV) is chosen because of the price (different ways are used to more accurately separate this segment of customers); $2 is better to set for a product, which is, after all, expected to provide certain emotions (like chocolate).

One of the well-known price formation tricks is the anchoring effect. It is used by plenty of marketers, separately from neuromarketing even. Here is an example from MLS Live.

We see that MLS not only singled out the “right” choice, but also makes it clear that it is the most profitable. And if the comparison of $79.99 yearly and $14.99 monthly does not look so obvious, since it takes you a bit of mental calculations, then the comparison of $79.99 for the complete package with the ability to watch all the teams and $69.99 for the ability to watch only one team looks quite obvious.

Taking into account the internal statistics of other similar examples, it may turn out that even among a sufficiently large number of clients, absolutely no one chooses a disadvantageous option.

But surely, according to the law of large numbers, one can come to the conclusion that it takes more customers to eventually get the expected small percentage of orders from inattentive people, eager to quickly complete the purchase, or people with some brain disorders who would prefer a different decision.

The anchoring effect is often given as an example in wine selling. There are a whole lot of experiments, proving that most people can not determine the taste difference between cheap and expensive wine. It’s all about the price of wine.

Similarly, a more expensive medicine can produce a better effect than the cheaper generics (at least in the experiments with placebo).

The anchoring effect though works even with completely different products. It was shown in the experiments by Daniel Kahneman and Amos Tversky. Drazen Prelec and Dan Ariely continued this research by conducting an excellent experiment with the MIT students.

They suggested writing the last two digits of the social security number on the sheet of paper, for a start. Then the students were asked to decide whether they would pay that much if these two figures were the price for a certain product.

Then the participants of the experiment took part in an auction. The auctions were conducted with six different products. In the upshot, participants with higher last digits of the social security number were willing to overpay for chocolate on average more than twice as many as participants with low last digits of the number.

In the case of an auction with a book on design, this difference approached the triple overpayment, and in the remaining four cases, this difference exceeded by 3 times.

 

How can it be used in sports? The first and, probably, the main example of using the right price in sports is the ticket price.

1. With tickets, price says a lot. This tactics, for instance, works fine with MLS. Ticket prices are lower than that of other major leagues in the US and Canada. The price for visiting games in other leagues serves as an “anchor”, so MLS fans have on average the lowest income among fans of the other major leagues of the US and Canada.

However, in other countries it is more difficult to implement, since football remains the number one sport without real alternatives. In this case, one can use, say, $9.99 rather than $10. You can try as well to deduct some additional costs from this amount, to sell separately.

And yet, I would not proceed from the principle of price, but rather from that of value. In the case of more expensive seats, a different tactics should be used anyway. The focus should be on obtaining a unique emotional experience and being in comfortable conditions, with ensuring in a variety of ways an increase in social status. I’ve dealt on that, for instance, in an article of the #AlienForMLS series on David Beckham team.

2. Taking into account the development of online platforms, it is important to apply the price for subscription to the platform. A prime example of the MLS Live platform has been mentioned above. The anchoring effect + price in the $79.99 format.

3. The last major factor is the paraphernalia. For seasonal club jerseys, $99.99 would be the right price. A similar format can also be engaged in selling various accessories. Though with vintage paraphernalia, it is advisable to use round numbers like $100.

If you feel that our experience will help you to more effectively cope with pricing in order to earn more, just make your request by sending me a message on E-mail leon@sportsneuromarketing.com, and we will contact you within 24 hours.

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Best regards,

Leon The Alien

 

SEE ALSO:
How to create a cool brand

 

Images: Tumblr, Giphy