A numbers game
A great place to start growing foot traffic and sales is to look at the psychology of pricing and what that really means. Pricing psychology refers to human beings reacting to numbers emotionally (i.e. what it feels like), rather than in a mathematical and rational way. It uses the customer’s emotional response to encourage sales. There has been considerable debate as to whether applying pricing strategies actually affect the way consumers purchase; however, the majority of studies agree that when applied correctly, they can indeed be effective. In fact, by pricing products strategically, a retailer can increase sales without significantly reducing prices. And in some cases, a higher price is actually more likely to increase sales.
Jewellery retailers can relate to the idea of ‘sticker shock.’ No matter what a client’s budget, the first time they see a price that is higher than they imagined, they experience sticker shock. This feeling usually goes away as the retailer shares information about the product, pointing out its features and benefits while showing other items with different prices and how they compare.”ƒ
The next area to explore is how a retailer should set prices. Benchmarking prices refers simply to doubling the cost. The traditional term for this is ‘keystoning’ and it implies a 50 per cent markup. Most retailers know this pricing strategy and use it, but I do not recommend it in all cases. Why is that? Products that are in high demand may actually have a higher perceived value, which means a retailer can usually price items higher than keystone. Consider various strategies when marking your products either up or down. Sometimes, it is not in your best interest to take an across-the-board approach and use the keystone method. At minimum, cover your shipping and handling expenses by multiplying the product’s cost by at least 2.4 per cent.
