Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true.
Maria Jose Guerrero
Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true. If done right, it can conquer every market for the business quickly. With abundant data available, the strategic makeover of the pricing models is becoming easy for companies.
For a quick understanding, behavioral tracking refers to gaining in-depth knowledge and insights into consumers through their web data. Their browsing habits, spontaneous decisions, shopping interests, and preferences come under behavioral tracking.
Companies can use customer behavior data as a tool to strengthen their hold on the market. A customer’s preferences, values, and tendencies allow businesses to work in sync with them through the collected data. Apart from this, customer behavior can also aid in:
Personalization is becoming the heart of a company’s growth. No matter in which area an enterprise is functioning, tailoring the services, products, and solutions is becoming increasingly crucial. Uniqueness and personalization attract the crowd like no other.
One of the best ways customer behavior data affects a business is by upgrading the value of customers for the business. The customer’s characteristics allow the company to target the people that match the business prospects well.
Everything that is up for digital display requires content. You must have seen companies unveiling their products or services through advertisements and making the initial public appearance. Two essential sales strategies – upselling and cross-selling comes through content optimization.
Last but certainly not least is the influence of customer behavior data on the pricing strategy. The pricing strategy essentially constitutes content derived from data analysis. Companies need to have a dynamic approach to the pricing system to attract the right customers.
The two essential terms surrounding the discussed topic are behavioral economics and behavioral pricing. Behavioral economics is a term used to describe the psychological study of consumers that influences their economic decision-making. And behavioral pricing refers to a strategic price set-up that is based on the behavioral patterns of customers in the market.
In a TED Talk called "Behavioral economics - how to make it work for us," Maciej Kraus discusses how customers reacted to a coffee experiment. With two choices of $3 and $7 for a small and large coffee, 87% preferred the $3 coffee, leaving only 17% of customers choosing the latter. However, when a medium option of $6 was introduced, customers started moving towards the large option.
The social experiment represents how companies can easily take advantage of consumer behavior and sell high-value products.
A common misconception about the behavioral pricing strategy is its application. Many companies in the market think that the industry giants are the only ones who can leverage this power. However, it is not the case, and small-scale businesses can adopt certain practices that allow them to begin with an effective pricing strategy. Here are some tips that you can use at the beginning of your journey
The model is based on upselling, where every advanced product offers something better to the consumers. It is a powerful psychological tool that works wonders for businesses. What Kraus mentioned in the experiment is a practical example of the good-better-best model that helps companies create a strategy for their customers.
Conventionally, people look for the medium variant as the comparative base. Then they check out the products' lower and higher variants. Companies lure consumers to go towards a more expensive choice with more benefits.
The power of persuasion is vital for a company to increase sales. In value-based pricing strategies, you need to subtly nudge or push the customers to make better decisions for themselves. Mind you it’s not by calling them and telling them to choose the expensive variant for its benefits. People don’t feel like it if you have to say to them the benefits yourselves.
Nudges here mean the little taglines like “buyer’s choice” or “value for money” that works its ways into their psyche. That’s how you persuade them to make better choices and sell the expensive variant of your products.
A businessperson knows what the word ‘free’ can get in the market. Customers go crazy when they get two products at a single price. Free products, services, or solutions sell the fastest in the market. If you hold your product quality to the topmost level, your free deals become more and more effective.
To upgrade the effects, you can offer discounts based on specific criteria. Engage the users with activities such as buying a product and receiving gifts by participating in a contest or a lucky draw. You can use a QR code to share exciting offers with your customers and extract information from them. Technology such as QR codes creates curiosity amongst users, prompting them to scan the QR and take action. Remember not to use a generic QR code. You can stand out and increase brand awareness by using the best dynamic QR code generator for your business that lets you create custom and reusable QR codes with your logo.
Online behavior tracking lets you understand the thresholds of the customer’s spend. Your product prices shouldn’t lift off to mars because no tactics will bring you the right amount of sales. Understanding the thresholds is crucial in today’s market because consumers are becoming more aware of the budgets and requirements.
Apple’s strategy in 2007 is an example of an anchor in pricing. It happens when companies slash out the higher price and put a lower price just for the customers to think that the new prices are much better than the initial ones. However, the underlying aspect is the actual worth of the product that the company is offering. The true worth of the product, service, or solution is the same as the new price. However, the bait is too much for the customers to question.
Consumer behavior significantly affects how businesses put the price tags for customers. No matter how profound a company is, the psychological aspect of the customers always pushes brands to make changes for more sales. These tips and tactics will help you better understand the customer behavior-based pricing strategy.
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