Famous Last Words: Pricing Questions
An e-mail from reader Nathaniel Rink a while back asked two questions about how to set prices and describe them. Here are my thoughts.
Question #1: Is $19.95 really better or worse in a direct marketing offer than $20? The common notion around here is that the extra nickel off has a big impact on uptake rate, but I've never heard any experts testify to this. In fact, I could see the counter argument that for online marketing, the simpler, smaller, cleaner $20 might take less thought to process and result in better success.
With the dot-com boom, all the tech-obsessed 20-somethings who set the protocols said "this was a new medium and new rules apply, and by the way, you old-timers are vestigial and no longer needed. We make the rules now." The result: the dot-com bust. That's because all marketing is to people. The same emotional appeals—fear, greed, guilt, anger, exclusivity, salvation and flattery—work in any venue, whether it be print, electronic or digital/film.
The origin of pricing goods at $19.95—as opposed to $20—started out as a theft-protection device in the days before cash registers. Say a shirt was priced at $2. A customer could give the sales clerk a $2 bill and take the shirt, whereupon the clerk could pocket the $2 and the store owner would be none the wiser. With the shirt priced at $1.95, the clerk was forced take the $2 bill to the cashier, who would write up the order and hand the clerk a receipt and a nickel change to give the customer.
That pricing scheme turned out to be a brilliant marketing technique, since $19.95 seems and feels like a lot less than $20. Generally, $19.95 will work better than $20. If in doubt, test.
That said, remember direct marketing legend Ed Mayer's dictum, "Don't test whispers." In other words, don't test $19.95 vs. $19.99 or blue paper vs. pink paper. Tests are expensive. When you are spending time, effort and money on tests, go for breakthroughs.
Question #2: A while ago, you had an article on an expensive ad intended to solicit leads for purchasing fine art prints. I think that you wrote [because] the call to action was simply to generate a sales lead, it was OK that the ad didn't include specific pricing info. I've inferred from this that direct marketing where the call to action is to sell a commodity should have the price listed on it. Is this a safe assumption? Is "Save 50%" alone as good as "Save 50%—only $25" or "Save 50%—was $50, now only $25" copy? If we're talking about a product with a price point, which most people should be familiar with, does that change the importance of the price appearing on the copy?
With products or services that are high-priced, and/or highly complex, lead generation is probably the way to go, rather than trying to close the sale with a one-shot effort. Get a response, and then do an elaborate and expensive snow job on the follow-up effort(s).
In the words of Seattle guru Bob Hacker, with lead generation, "The more you tell, the less you sell. When you say too much, you often create reasons not to respond. The goal at each step of a multistep sale is to get to the next step."
With a lead generation effort, you do not want to get into the nitty-gritty of features and price. All you want is a reply. Get into this other stuff in the follow-up(s).
Incidentally, according to Hacker, if you spend too much on the initial lead generation effort, you are guaranteed to lose money; you can never recoup.
In your question above, you mentioned "Save 50%" as a copy technique. A general rule is that the offer of a percent discount is far weaker than a dollar amount. You cannot put a percent in your pocket or pay a bill with a percent.
Going back to the shirt shop, the winter sale offering 50 percent off is strong. Far stronger is "Buy one, get one FREE!" It's the same 50 percent off, but you can imagine having two shirts. Further, with a half-off sale on $50 shirts, you are taking in $25 per shirt. With a two-for-the price-of-one offer, your revenue is $50, so you've taken in twice as much money and moved twice the inventory.
NOTE: If you have a marketing question, write me and I will try to answer it.
Denny Hatch is a freelance direct marketing consultant and copywriter, and author of the e-mail newsletter, Denny Hatch's Business Common Sense. Visit him at www.businesscommonsense.com or www.dennyhatch.com, or contact him via e-mail at email@example.com.