Learn how to navigate the tricky terrain of pricing on Fiverr with this guide. Discover how to strike a balance between pricing too high and too low, and find the 'neutral' position. Explore the science behind pricing and how to establish perceived value, taking into account factors such as brand, previous experience, and market research. Learn about the role of perception in pricing and how to control reference points. With these tips and insights, you can maximize profits and create a compelling offer that customers will love.
How to successfully set your product's price on Fiverr
Even while there is a science to pricing your products appropriately, it remains one of the most challenging things to get right. We risk making it too difficult to sell ourselves if we set the price too high. We run the danger of losing money if we set it too low. So where is the 'neutral' position?
We must suppose that a consumer would be prepared to pay up to $10 to use a service if they believed doing so would save them $10.But how can we assign a value to their expectations? We must also take into account the fact that a buyer will only make a purchase if the service is within their price range or if the value they anticipate or perceive outweighs the price. What therefore establishes perceived value?
These inquiries are essential for determining a fair price. Large firms may conduct market research to evaluate the demand curve, price elasticity, and sensitivity to price (the demand of a product at multiple price points). Additional market research can reveal some of the elements that influence consumers' decisions, perceptions of value, and willingness to pay.Generic medications are a prime illustration of the effects of perceived value. On a pharmacy shelf, a pack of Advil sits next to a generic Ibuprofen pack; the Advil costs 50% more, but why? It is Ibuprofen, Advil. Customers may value a chemical more highly if they are willing to pay more for it because the chemical is associated with a well-known brand. The issue is worse for novice sellers. Indeed, information from Ebay sellers indicates that less experienced sellers opt to sell through auctions while more experienced ones set "buy it now" prices (in which case the market determines the best price).
Internet pricing brings both new opportunities and difficulties.Some people foresaw the demise of pricing methods as we knew them when eCommerce first emerged. The capacity to distinguish prices, which in the traditional world of brick and mortar retailers was driven, at least in part, by the costs associated with such search, would not exist if customers did not experience any costs to go check a competitor price (e.g., driving to the other side of town).
This prediction of a new era in pricing was incorrect. Brands, habits, and interpersonal ties proved to be friction factors that might sustain the standard pricing systems. The availability of data, simplicity of adjusting prices, and capacity to assess the reaction of the market, however, are significantly different (the aforementioned auction pricing mechanism as one example).
There are a few things that every seller may do to improve their pricing by fusing established concepts with fresh data-driven insights:
Construct perceptions
The world is driven by perception. In the end, they serve as the foundation for people's decisions and elicit emotional and cognitive responses. What then are the main variables that affect how people perceive value in terms of price? How can people "know" that one business is more valuable than another or that one sort of car would cost more than another? Of course, the brand is one of the key factors that influence perception. The brand could be a well created representation of a significant company or it could be the name of a certain actress or person.
In both situations, the brand acts as a cue to draw details and connections from consumers' memory (for instance, when people hear the word "Volvo," they typically think of safety, but when they hear the word "Rolls Royce," they think of luxury). This may involve prior encounters, attitudes, reputations, and publicly available information.
Similar to this, any new data, whether it be visual, aural, textual, or numerical, will act as a retrieval cue to create and mould the perception of worth. For instance, you might assume professionalism, competence, and value-delivery from a salesperson you have never met before if they are dressed professionally and competently. Similar to this, you could anticipate a premium price when you go into a hotel and see polished, high-quality design.
Richard Thaler, a Nobel winner, asks participants in a well-known thought experiment to picture themselves relaxing on the beach with a buddy. After that, the friend stands up and says he's going to purchase beer. He offers to acquire one for you as well, but he's unsure how much it will cost. In order to buy the beer and bring it to you if the price is that low or less, he asks you for your maximum WTP. The experiment involves telling half of the participants that a friend will buy beer at a posh hotel nearby, and the other half in a run-down grocery store.
People are prepared to pay nearly twice as much when the friend plans to purchase the can at a hotel, despite the fact that the actual experience is same (you would drink the same can of beer on the beach). Of course, this appears absurd. It's not, though, if we consider that individuals anticipate that hotel beer will be more expensive and that when asked how much they would be prepared to spend, they reply with their expectations rather than a realistic estimate. In other words, since perceptions rather than 'actual' value indications determine behaviour, people react to an offer in different ways.
Advice: An online offer's perceived worth can be influenced by all of its components.
From the language used to describe the product, to the graphics and signals offered, to how the client is interfaced with. Plan each of them carefully to create the impression you want.
controlling reference points.
One of the lessons to be learned from the beer on the beach illustration is that everything is relative, as a wise man once said. Years of research, in particular, point to the fact that value perceptions are particularly open to relativism.Therefore, the crucial query is in relation to what. The reference point is the technical word for this response. The fact that this reference point is changeable is what makes it more intriguing from the standpoint of practical pricing. For instance, while determining the price of a new product, the seller may compare it to an existing model, leading the value to be directly compared to that model, or she may compare it to a rival product to demonstrate superior value. A decrease from the list price also effectively sets the list price as the reference point, making the new price represent an obvious increase in value.
On the other hand, price rises may be viewed as a loss in comparison to the earlier, lower price. Price rises should be handled with additional caution because we are aware that emotional losses often outweigh rewards. This may help to explain why gas prices rise gradually yet fall in sharp, observable leaps. The precise reference point the buyer is likely to utilise might be greatly influenced by the way the seller positions the offering.
When selling a motivational video, for instance, the vendor may specify whether it is a short film or a long clip. What frame of reference a potential purchaser would employ could be determined by this labelling.
Advice: Customers will base their value judgments on the most easily accessible reference points. Calculating the suitable pricing requires knowing which ones they might utilise and making sure they are the best ones.
Organize goals
The examination of the reference point the buyer should use is closely related to the pricing objective. While the primary objective of a price is to make money transfers easier, there may be other commercial objectives for pricing. Take the situation of books in the US, for instance. A certain list price is placed on the cover of new books before they are released. However, the real cost that clients pay changes during the course of the book's existence.
The book may be offered at a discount both before and after launch (for example, 30% off); this discount gradually disappears as the price rises near the printed level; eventually, the book is once more lowered and, if successful, is published in a considerably more affordable soft cover. Different pricing objectives over the course of the book's lifecycle are represented by this price dynamic. The objective is to increase reading early on so that word of mouth may thereafter increase market penetration.
When there are enough natural market forces at work, there is little need for further incentives because the price will automatically adjust to the level that will maximise margin and profits. Eventually, when the majority of the target market has been attracted, the price is once more lowered in an effort to attract laggards or readers with less fervent interest levels. This dynamic displays three widespread pricing objectives.
There are additional. Luxury or high-end goods are frequently marked up significantly to indicate this to potential customers. As was previously said, buyers use a powerful price-quality heuristic (i.e., they hold strong beliefs that the price and quality are highly correlated). Simple pricing is more uniform and signals consumer orientation compared to complex pricing structures (e.g., one complete price with no added or hidden additions).
The key is to know your pricing objective in advance and make sure your techniques and price points are in line with your approach. When I once asked a manager who needed assistance with pricing what their objective was, they said, "profit." It was obvious that the manager didn't get the query.
Advice: Start by determining your business aim before considering pricing. A means to an end is price. Without a specific goal in mind, it is challenging to accomplish.
In conclusion, greater customer satisfaction and higher conversion rates can result from awareness and knowledge of the numerous potential consequences of pricing levels and how they interact with the rest of the strategy and execution.
The first step to better pricing strategies and long-term profitability is to understand how perceptions, reference points, and pricing objectives interact.
