Psychological pricing

cory

cory

Tree House enthusiast
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This is the term given to the practice of pricing, for example, a $6.00 item at $5.99, tending to cause consumers to perceive it to be significantly less expensive than if it were priced at $6.00 and causing higher sales of the item, more than compensating the seller for the 1 cent price reduction.

Do any of you use it when pricing tree work? I generally don't, I tend to price everything in increments of $25.00. If an item on the estimate is worth less than $25.00, I don't price it.

But I wonder if, instead of pricing something at, e.g., $150.00, I would generate more sales by pricing it at $148.00. Or even $154.00 to battle the perception of just throwing round numbers onto an estimate.

Instead of pricing a job at $1000.00, maybe $995.00 or $1015.00 is better.

What say you?
 
John Ball covered this in a lecture of his. I have the notes at home, but it's interesting. I'll post them when I get back


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You never want to have an even number. A $1000 becomes $990, just so you can beat the other guy's $1000 bid.
 
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  • #6
NickfromWI said:
Yeah/ but you're doing it wrong. If it's $150, price it at $199 :)
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:thumbup:

rangerdanger said:
John Ball covered this in a lecture of his. I have the notes at home, but it's interesting. I'll post them when I get back
Click to expand...

Thanks

MasterBlaster said:
You never want to have an even number. A $1000 becomes $990, just so you can beat the other guy's $1000 bid.
Click to expand...

Good call, I think.

Altissimus said:
....I usually don't bother with that, ...or maybe I should...:/:
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Yeah, that's what I'm sayin
 
MasterBlaster said:
You never want to have an even number. A $1000 becomes $990, just so you can beat the other guy's $1000 bid.
Click to expand...

I disagree. What you're saying is "the other guy will do the job for $10 less."

So if I take your advice and go $990, other guy is just gonna do $980.

I bid it for the price I think it should be. I'd call it an even thousand. Focus on establishing a rapport with the client and letting them see that you really are the right crew for the job.


love
nick
 
Bidding is one of the hardest parts of the job IMO.

Like Nick, I focus on selling my company. Pricing be what it may be.

I've never priced a job at $999 or nothing. I'd feel kinda cheesy myself.
 
Sealed bids and things like that are tricky. Sometimes they take the lowest price and roll with it, sometimes they throw out the high and low bid and choose from what's left in the middle. Never quite know which way it's gonna go.


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My take on it, its a lot easier to swallow $975 plus tax than $1080 out the door. This leaves people knowing what's the governor's share, and sometimes they like to negotiate with this $975, if they hand me 975, maybe I'll take 950 (or 975), smile, say thank you and tell your friends.


I frequently break each task down, so I might have 4 x $20, so I just add it in. If they want an itemized bid, then I might break that $80 apart, or just lump it with a note as to what its for.



on a sidenote, the requirement of giving a penny back to the customer means that the register/ till has to be opened, presumably recorded on the register tape in some way, if there was no transaction. Kept store clerks from quietly pocketing the whole dollar.
 
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  • #13
squisher said:
Bidding is one of the hardest parts of the job IMO.

Like Nick, I focus on selling my company. Pricing be what it may be.

I've never priced a job at $999 or nothing. I'd feel kinda cheesy myself.
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Focus on selling your company is good advice. Of course, one part of your company's package is the price.

And sometimes you don't meet the customer when bidding. Sure, that isn't desirable, but it happens, so in those cases pricing could be more important than usual.

SouthSoundTree said:
on a sidenote, the requirement of giving a penny back to the customer means that the register/ till has to be opened, presumably recorded on the register tape in some way, if there was no transaction. Kept store clerks from quietly pocketing the whole dollar.
Click to expand...

I didn't know that.
 
On private work I have a $40/$80 system, it's worked pretty well for a fair while.

$480 sounds better than $500, and $540 is the option that sounds better than $580. That's unless they are an obvious haggler which is pretty common with a multicultural area, then it's any old price and drop 20 per cent. That usually works, but it's just a local thing. Worked today actually.
 
It funny how haggling in some parts of the world is a fair, normal arrangement between two people, especially for a unique product or service (handmade items in an open air market, used items at a flea market or Craigslist), each trying to win, and other situations it seems taboo.

A funny story, at least to me, was a friend of a friend was trying to buy a new luxury car, Lexus, if I'm not mistaken. He was ready to write a full payment check and wanted to haggle. The dealer said that was the price take it or leave it, and that they make deals at Toyota.

Resume to normal programming.
 
...so I got a text from a customer yesterday, have done previous removal work for and a trim tree. Wanted a price to remove the trim Tree. Looked it over and priced it at five hundred bucks which is fair and a nice round number. He just got back to me and authorized job. I like selling this way.
 
cory said:
Focus on selling your company is good advice. Of course, one part of your company's package is the price.

And sometimes you don't meet the customer when bidding. Sure, that isn't desirable, but it happens, so in those cases pricing could be more important than usual.


Cory, you may still point out where your company excels like customer service, website, job picks, references, etc.., I personally hate to leave a bid and not meet with the customer or least talk to them on the phone. In my limited experience the customers that dont have time to talk or meet you are looking for lowest price most of the time. I have also found that follow up calls work for these customers because they may just be really busy and hadn't really had time to pick which company to use yet.
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In LA it's very different. We work with a lot of people that I never see. I'm not disagreeing with you- more just commenting on the weirdness of Los Angeles.


love
nick
 
I find if its a significant job like a large removal I pretty much have to meet with the customer to discuss access, impact, what can or can't be moved, all that sort of stuff. Very few jobs do I agree to look at without the customer present.
 
SouthSoundTree said:
It funny how haggling in some parts of the world is a fair, normal arrangement between two people, especially for a unique product or service (handmade items in an open air market, used items at a flea market or Craigslist), each trying to win, and other situations it seems taboo.

A funny story, at least to me, was a friend of a friend was trying to buy a new luxury car, Lexus, if I'm not mistaken. He was ready to write a full payment check and wanted to haggle. The dealer said that was the price take it or leave it, and that they make deals at Toyota.
Click to expand...

Smart dealer. Never haggle with anyone who already has a checkbook out, especially at full price. Haggle with the prospect willing to walking away. No need in leaving money on the table.
 
NickfromWI said:
In LA it's very different. We work with a lot of people that I never see. I'm not disagreeing with you- more just commenting on the weirdness of Los Angeles.


love
nick
Click to expand...

Everytime I think I got something down I realize I still don't know jack :? Thanks Nick for the feedback.
 
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