In the last few decades, psychological research on consumer behavior, buying decisions and how the brain works has grown dramatically, providing marketers and salespeople with insights and tools for their trade.
As MIT researcher Dan Ariely says, people are predictably irrational — and behavioral science can help us predict them. That’s why understanding the psychology of your potential customers can help if you want to increase your sales and generate more revenue.
In this article we will describe 3 of the most effective psychological tactics you can use to increase your sales.
#1 - Give Buyers Fewer Options
Have you ever experienced analysis paralysis? That’s when there’s so much information that you feel overwhelmed and don’t know what to do.
A classic Harvard study in the 1950’s (still valid, by the way) showed that the maximum amount of objects a person can hold in memory is 7, plus or minus 2. If you present more than that number (10+ for example), the buyer won’t remember the details of each and won’t make a choice.
A famous example is the jam study, where two groups of people were given jam samples and asked to buy. Out of the group that had 24 choices, only 3% bought jam; but out of the group that had only three choices, 30% made a purchase.
For best results, only offer 3 or 4 options to your clients, with different prices that allow you to upsell and make their decision easier (more about pricing later).
Most SaaS companies stick to this number, with the average number of packages they offer at 3.5. With only 3 or 4 options, potential customers are able to compare easily and make a quick decision.
#2 - Bundle Products Together
So, perhaps you have more than four products or services you offer. What can you do? Bundle them together.
Just offer several products for a single price. The key is to add value, with add-ons and features that cannot be bought individually.
A great example of this is Microsoft Office 365. See the pricing per bundle below:
Unbundled pricing allows the buyer to pick only what he wants. In this case, the buyer may want to purchase only Word and Excel, but it’s not possible. He must get a bundle with other programs.
When you start bundling, you can sell products that may otherwise not sell as much in a much speedier process. When you sell the same bundle to everyone, your marketing and selling costs are lower.
In psychological terms, the bundling tactic reduces the “pain of buying”. This comes from a study that showed that expensive items activate the part of the brain that processes pain, while reduced pricing activates the part responsible for decision-making. When you bundle products together, buyers can’t see the individual prices, only a “reduced” price — thus avoiding pain.
You can start applying this tactic by offering a few standalone products as a single bundle. For instance, bundle your most popular products with other specialty products and label them with a cool and attractive name.
However, don’t bundle a quality product with a cheap one as it could backfire on you. Remember to always add value to your clients.
#3 - Use the Decoy Effect When Pricing
People usually pick the cheapest product or package presented, even though it may not be the best value. This next tactic involves activating the brain to choose a particular (often the best value or most expensive) option by introducing an “alternative”.
Dan Ariely discovered this tactic when The Economist apparently made a mistake in their pricing page, advertising their online version only for $59, the print version only for $125, and a third option costing $125 for both print and online versions. The second version was useless, since it was priced the same as the third option but had less value.
Ariely took that pricing page and conducted some experiments with his students. He explains the fascinating results in this short video:
You may see the decoy effect every day when you stop by the coffee shop to get a Latte. For instance, let’s say prices are presented in this way:
- Small - $3.00
- Large - $7.00
Here, most people would choose the cheapest option because they’ll perceive the large one as too expensive. However, when you introduce an alternative, the medium, things change.
- Small - $3.00
- Medium - $6.50
- Large - $7.00
Now most people will buy the large coffee because their perception changed — for only 50 more cents than the medium, the large size looks like a bargain.
You can apply this tactic to your pricing easily. Pick a product you want to increase your sales for and then create two more price points applying the decoy effect.
For example, offer the following:
- “Intro” package - 100 users for $100/month
- “50 Additional Users” add-on - $150/month
- “Advanced” package - 200 users for $160/month
With great power, comes great…
The above are powerful psychological tools that can help you take advantage of how the brain works. Be careful and responsible though with how you use them.
The aim is not to manipulate people into buying things they don’t need or spending more on a premium product when a cheaper version will be enough. Always add value and create a wonderful experience for your clients.
Focus on customer success and use these tactics to up-sell your products and create customer loyalty. In the end, this will result in more growth for your company than simply pushing sales irresponsibly.
Looking for other ideas to grow your sales?