A company's choice of pricing can create a psychological response in its customers, but how can businesses choose the best pricing tactics to create a positive response, maximising customer satisfaction and profits. “Psychology of Price” author, Leigh Caldwell uses a nuanced understanding of psychology to unlock the potential of behavioural economics that can provide new models for business.

2. £5.99
£7.99
0
50
100
Total
revenue:
£619

3. How
should
this
shop
increase
its
profits?
a) Decrease
the
price
of
the
£5.99
boCle?
b) Decrease
the
price
of
the
£7.99
boCle?
c) Increase
both
prices?
d) Round
them
up
to
£6
and
£8?
e) Offer
10%
off
if
you
buy
three?
f) Something
else?

4. 0
50
100
£5.99
£7.99
Total
revenue:
£809
31%
up!
£14.99
0
50
100
Total
revenue:
£619

5. £3600
£2150

8. Time
given
up
to
be
here
Cost
of
travel
Cost
of
food
Benefits
of
new
knowledge
Day
out
of
the
office
Fun
talks
People
I
might
meet
-­‐
networking
Boring
talks
Possibility
of
TSB
funding
Could
find
a
new
job
SiZng
in
a
chair
all
day
Hot
women
Hot
men
£199

15. £234

16. £14.99

17. ₹47,291,002,181

18. Price
is
an
arficial
neatener

23. • The
same
sofa
that
I’d
pay
£1199
for
• I’ll
pay
£59.99
a
month
for
36
months
• A
total
of
£2159.64

25. £6/boCle
£60/boCle

32. Cogni&ve
economics

33. THE 7 PRINCIPLES OF PRICING
Pricing should be based on the
value to the customer,
not the cost to you
1
1 copy of PowerPoint – what is it worth?

34. THE 7 PRINCIPLES OF PRICING
Prices should be tangible,
so your customers can see what
they get for what they pay
2
App vs. website: “what am I getting?”
A bird in the hand etc…

35. THE 7 PRINCIPLES OF PRICING
The positioning of the product
makes a huge difference to how
much people will pay for it

36. THE 7 PRINCIPLES OF PRICING
Prices should be comparable
(on terms that you control)3
How much is something really worth?
Make your product seem like a good deal by
choosing the right comparison point.
Nescafe
instant
£2.49
Lavazza
coffee
£3.49
Starbucks
la<e
£2.55
vs.
vs.

37. THE 7 PRINCIPLES OF PRICING
If you want to change your
prices, you must
reframe the product
4
What’s included?

38. THE 7 PRINCIPLES OF PRICING
Price differentiation is the
key enabler of profit5
Horses for courses – different people have different
budgets.
To maximise profits, have something for everyone
and let people tell you what they want.

39. THE 7 PRINCIPLES OF PRICING
Pricing communication
shapes the customer’s
perception of value
6
There’s no absolute value – the way you talk about
the product and its price will set expectations

40. THE 7 PRINCIPLES OF PRICING
You must be prepared to
lose some sales in order
to increase profits
7
Accept that some of your customers won‘t come with you
….but it's still worth it.

41. The
seven
principles
1. Pricing
should
be
based
on
value,
not
cost
2. Prices
should
be
tangible
3. Prices
should
be
comparable
4. To
change
your
prices,
you
must
reframe
5. Price
differenaon
is
the
key
enabler
of
profit
6. Pricing
communicaon
shapes
the
customer’s
percepon
of
value
7. You
must
be
prepared
to
lose
some
sales

42. Usually
£14.99
Today
£12.72
Signed
£12.71
Free
guide
to
behavioural
economics