The Psychology Behind High-Low Pricing Strategy
By definition, high-low – or hi-low – pricing is a strategy adopted by retailers, where the company will initially charge a high price for the product and later, when it becomes less desirable, discount it.
The examples of high-low pricing strategies are plenty, but there are basic insights to sales to keep in mind any time you’re settling on price points for merchandise.
One of the first things to consider is an age-old trick, and it plays into consumer psychology: if you’ve got an item that you want to sell for $10, sell it for $9.99. The mind has a tendency to become turned off if they think merchandise is too expensive, and even just by discounting something by a single cent, you’re welcoming the consumer to contemplate a purchase.
Beyond that, though, as far as pricing, if there’s any opportunity for you to do a bundle items that have become less desirable due to retail seasonality or popularity, that’s always going to attract shoppers. Use deals. Convince shoppers to buy two of something, because if they’ll but the first, they’ll get a second of equal or lesser value for half price; welcome them to the clearance rack and let them know they’ll get an item for free with a purchase of one full price item. If you start playing around with the different combinations, it’s likely increase the chance of triggering an impulse buy.
Use displays and signage to your advantage to captivate and inform
For products, it is simple logic that some being carried in your retail location will be more expensive than others, and that, too, is where displays are important. If you’ve got a high price tag on an item, show the quality behind it – take one out of the box for the consumer to see and touch and experience; that typically does shows the quality that a consumer can associate with a price tag. Rather than hiding a product in a box, you’re putting it on display and using it as a storytelling opportunity to explain the price. If you’ve got a high dollar item, and you typically see people shy away from it because of the price, there’s an opportunity to integrate a storytelling display to validate why the item is worth the price.
Conversely, you don’t want a more affordable product to just be thrown in the mix or hidden in some random basket with similar items. You still want it to be elevated to an extent, and displays can be helpful there, too. Displays are the retail merchandiser's opportunity to make an otherwise boring seeming product seem elegant, which then makes the shopper feel like he or she is getting a deal because it’s priced so low.
If you’re using a display, the same fixture could be used to either help validate an expensive price tag, or also create a really unique way to make a product seem even more expensive. Regardless, you’re shaping the story, and making the consumer believe that what you’re offering is really a heck of a deal.
Download IDD’s free guide to learn how to maximize the effectiveness of your retail displays.