Can your customers understand your price?

Sometimes it is better to increase the price than offer a low price. A price must be believable. 2 dollars for a personal Ed Sheeran show, sounds so outrageous that people reject that offer. We will look at persuasion using the Elaboration Likelihood Model.

Not understanding is not buying

Imagine 2 products on a shelf, product A has fewer features than product B, however product B is way cheaper. Economically, this should be an easy choice. Cheaper and more features, you should get it! But in our mind, we try to understand the lower price, and since it doesn’t make sense with the information provides, we end up not choosing.

Elaboration Likelihood Model

A forgotten but perfect model for this example is the Elaboration Likelihood Model (ELM). This model explains two routes to persuasion: Central and Peripheral route. It starts with receiving the message about product A and B and when there is enough interest in the product, you continue in the model. However, the second step is about the ability to process the information. Not being able to process the information could be caused by anything: the customer does not understand words, any heuristic cues don’t match the product, or the customer doesn’t understand the price like in the last example. In that case, the customer switches from the Central Route to the Peripheral route to be persuaded. Where the Central route is based on a thoughtful consideration of facts and arguments of the message, the Peripheral route is based on factors that are not part of the arguments of the message. For example, an attractive seller, the expertise of the presenter, background music, or other surface-level characteristics. This route is chosen when a customer has no interest in the message or does not understand the message. Later on, we will go more into detail on the impact of being persuaded via the peripheral route vs. the central route.


2 dollar Ed Sheeran 1-on-1 concert

Here is another example of not getting the image. A lot of people would be interested in a 1-on-1 concert by Ed Sheeran which only costs 2 dollars, but the passing customers do not understand the message. What the video:

Clearly, this message isn’t being processed by the customers. The central queue is obviously not followed and also because the person proclaiming the message isn’t trustworthy, the peripheral route also doesn’t end up in being persuaded. Probably the persons that decide to go in, are interested in an adventure, they understand it is an adventure and is being persuaded by a whole different message than that is being sold.

Effect of different routes

You can ask yourself, why does it matter which route the customers take? But you can imagine that the way a customer is being persuaded can have a different effect. Attitudes via the central routes are way stronger, which means that these attitudes are better predictors of future behavior and are more resistant to changing surroundings. This also means that switching behavior is less likely to occur when the central route is chosen compared to the peripheral route.

Tips for lower prices

If you are scared of raising the price of your product, which is not weird, try to make the price understandable. For example, explain why your price can be that low. What services don’t you provide compared to the competition with a higher price, what features aren’t in your product? Discount airlines for example, show what you don’t get with their services (e.g. no reservation of seats, longer lines), and makes the price reasonable. Because if your customer doesn’t understand, the customer won’t buy.

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