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A/B Testing Idea #110 - As your products become older, increase their price
Description
Your customers don't judge prices in terms of "absolute values" (as they don't really know the exact value of things) but instead using a set of references constructed through looking at previous prices, product comparisons, etc.
Reducing the price of your older products when new ones are released may seem like a good idea but is in fact doubly negative. Firstly, reducing the price of your products will make people think that you are trying to "flog" them because they are no longer selling, are faulty, etc. Secondly, your customers will readjust their reference scale accordingly meaning that your new products with their higher prices will seem even more expensive than they actually are comparatively.
It's therefore in fact better to raise the prices of your older products when releasing newer ones to introduce these new products in to more favourable conditions.
Inspired by Nick Kolenda
Principles
- Anchoring Effect (Tversky & Kahneman, 1974)
The Research
Anchoring Effect
The Anchoring Effect describes the way in which people utilise the first piece of information they receive as a point of reference for making judgements about subsequent pieces of information.
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