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Are you familiar with the strategy of charging $ 19.99 instead of $ 20.00 or $ 99.99 instead of $ 100.00? According to a study by MIT and the University of Chicago done in 2003, prices with a "9" ending make people buy more. For example if you had to choose between $ 55, $ 59 or $ 63, the majority of people would choose $ 59 even though it is more expensive than the same item priced at $ 55.

This technique is widely used and can help you define the selling price of your products/services in a wide range of industries. But it is not to be used for the luxury industry. Instead of encouraging people to buy, a lower price would take away from the brand image. Indeed, luxury products use the price as a positioning tool (read the article on this), and having a low price is counterproductive in this strategy. In the luxury industry, the price you pay is important. Having a discount item is not perceived as an advantage by the people targeted by this strategy. For many, having a "reduced" price is the beginning of the popularization of the brand. Be aware.

Another pricing strategy that is used is to offer at least three options with different prices. For example, have an "economic" option, a "standard" option and a "premium" option. Of course, the "packaging" of the product/service must be done accordingly. But generally buyers will opt for the "standard" option. Of course, the benefits must be real.

Here are some examples to illustrate this strategy:

- Internet provider companies will offer more than three options, but the differentiation factors will be the transfer speeds and monthly capacity;

- Cell phone companies use the same strategy, but they use the number of minutes and monthly data capacity;

- Airline companies offer several types of tickets when you book your trip, with different special advantages: luggage allowance, seats, boarding priority, included meals, etc ...

If you can offer options to your consumers, remember to structure them well and keep in mind that the best seller will be the one in the middle.

If you have any questions or comments, please do not hesitate to contact me.

Stéphane Elmaleh-Riel, B.Ed., MBA
Marketing consultant

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