8 ways big box companies get customers to spend more

Potential customers weigh dozens of factors before they buy your product, but the one that will make or break a decision to buy is price. No matter how great your product, if the price isn't right it won't sell.

Big Box stores know this and they've worked for years developing psychological techniques to get customers to spend more.

Luckily for all of us these techniques are not well kept secrets. In fact, you likely know a few of them already, but sometimes we just need a little reminder.

Some will help you upsell current products, some will help you move more out the door, you never know until you try.

1. Anchor Pricing

In his book, William Poundstone describes how the Williams-Sonoma (an appliance company) started selling a new breadmaker for $279, but it wasn't selling as well as they had hoped. The chain decided to put out a second, bigger breadmaker, for $429--it was a flop.

No one had wanted the lower priced breadmaker so they certainly didn't want an even more expensive, bigger model. When the bigger breadmaker came out though something interesting happened: sales of the lower-priced breadmaker doubled. People had something to compare it against and by comparison they were getting a good price.

If you give someone a single option they'll look at the price and decide whether they need it at that price. If you give them two options they'll compare them against each other and decide if they want one of them at the lower price.

*Use a high priced item to make a lower priced item look reasonable by comparrison--the high price creates an anchor that customers compare can compare similar items to. *

Restaurants use this by creating a $75 surf and turf option next to a $32 steak. The steak alone might be too expensive for many people but beside the $75 option it looks relatively cheap.

The Downside

Quality is often associated with price. Make sure you consider that a lower-priced item may be seen as inferior to the higher-priced one.

2. Prestige Pricing

When Apple, Inc. announced its gold watch (costing $10k to $20k a piece) the stream of criticism seemed to be never-ending. Journalists described the "infuriating economics behind Apple's Watch Edition" and things like this:


Despite the criticism Apple's Watch Edition sold out in China within one hour of going on sale. How is that possible?

Because Apple knew something tech journalists weren't considering: a "fair price" is subjective.

In China's growing economy there is huge demand for luxury items just for the sake of having them. In such a case the price is actually part of the product's appeal.

Some people will buy the most expensive product just because it's the most expensive, so give them the option to do so.

The Downside

Like with Apple, people won't like it if they think you are artificially inflating the price. But remember: Apple still sold out of its $20,000 watches.

Combine a high-priced item with a less expensive one to maximize the combined effect of anchor and prestige pricing.

3. Middling Effect

Ever notice that a lot of restaurant menus have three categories of dinner food? There's the soups and salads for light eaters, the sandwiches and pastas dishes, and there's the "Main Courses" like steak and lobster. Guess how the three categories are priced.

By offering a middle option you cater to those who can't afford or don't want to pay for the expensive option but want something more substantial than the cheap one.

What do you do for people who can't afford the high price but still want something higher quality than the 'cheap' option? Create a middle option.

The middle option should be the one you expect to sell the most of. Some people may be cost sensitive and go for the cheap one and some will do the opposite, but most want to go right for the middle of the road.

The Downside

There's something for everyone here, which is why it's so widely used. There really isn't a downside (leave a comment if you think of one!).

4. Strategic Discounting

Have you ever gone to a store and found a deep discount on exactly what you were looking for? On more than one item? Did it make you feel great? Give that same feeling to your customers with the strategic discounts.

Discounts make us feel good because we're saving money! Yes, maybe we spent a bit, but we needed a new shirt anyways right? Maybe it was a bit more than we would have spent otherwise, but the savings means we got a good quality shirt at a great price.

The keys to a great discount strategy are:

  • don’t discount your lowest priced items, you’ll be cutting into the smallest margins,

  • don’t discount too much or too often unless you want to be a discount store,

  • do discount enough that the customer feels good about it; Five dollars off a dress costing $180 seems like a trick.

  • The Downside

    Too much discounting can make you or your products look cheap, or it can set customer expectations and they'll just wait for your next sale.

    5. The Magic of Charm Pricing

    In one experiment, researchers set the price of a garment to either $34, $39, or $44. the garment with what is called ‘Charm Pricing’ (the one ending with a 9) outsold both the cheaper and more expensive ones. It’s a trick we all know: set the price to end with 9 so people think it’s significantly cheaper.

    The interesting thing is that we aren’t exactly sure why it works. Conventional wisdom is that when we look at the prices we associate the price with only the first number, so $39 is $30-ish and $44 is $40-ish.

    If that were right then the $34 garment should have outsold the $44 one right? But it didn’t, people bought 16 of the $34 garment and 17 of the $44 garment.

    There was no point of comparison to similar shirts that would allow the anchor, prestige, or middling effect to work so what is going on here?

    A couple plausible explanations are that shoppers must associate the number 9 with a sale or that the charm price seems cheap compared to the rounded price.

    Whatever the answer, charm priced items generally outsell rounded price items.

    The Downside

    Charm prices can be informative to shoppers in more than one way. In some cases it conveys a sale or good deal, in others it can convey cheapness. If you want to show that “this isn’t a sale, you pay for quality here,” consider using rounded prices.

    6. Loyalty Cards

    Free stuff is great and if you can get free stuff for doing something that you already do every day, that’s even better. Loyalty cards will bring customers back to you instead of your competition because they can buy the same thing but work their way towards something free.

    They work best for lower-priced items that customers buy often: coffee, t-shirts, office supplies. When you’re selling a commodity loyalty cards will help differentiate your brand.
    The Downside

    They can be annoying and are sometimes associated with cheapness. You wouldn’t expect to have a stamp card when buying a thousand dollar suit because it’ll likely never get filled up so in that case it just dilutes your brand.

    7. Bundling

    The Economist offers three subscription packages:

    • Digital Edition $127/year
    • Print Edition $127/year
    • Print+Digital $160/year There is clearly huge savings to be had by combining the Digital and Print editions, about 37% in fact. How can The Economist afford such a deep discount?

    The Economist's value comes from its editorial content. They've already decided that for $127 they can give you a year's worth of print magazine so the extra $33 is simply covering the cost of hosting a website and posting content there.

    One key to a good bundle is knowing your margins. In this case, The Economist is adding something with a very low unit value (the cost of one person's web traffic) to the full price of another product. The result is that they end up making more money overall.

    Bundling works best when the bundle price is relatively close to the unit price. The Economist's bundle only raises the price by 26% but gives you double the content! (sort of).

    Bundle complementary products to gets customers to buy more.

    The Downside

    If you don't know your product margins this can be dangerous. Make sure you're still taking home a profitable margin or even though customers are spending more, you're losing money.

    8. Get Rid of the Dollar Sign

    Dollar signs don't represent value or gain, they represent cost. The dollar sign on a menu for example separates cost and value so that customers are comparing price versus the food they get.

    Instead, lose the dollar sign and move the price as close to the food as possible. For example, rather than having the food listed on the left and prices listed on the right put the price ($-less) inline with the food items.

    Althought this is most widely used by restaurants it applies to anyone. Lose the dollar sign and just write the number; your customers can still figure it out.

    The Downside

    It's a bit harder to read and find the price, but the loss of legibility will be more than made up for with higher revenue.

    But Wait, Isn't This Just Tricking People?

    You need to set a price, unless you pull a number out of the air you'll have to go through a process of consideration and testing to get it right. It's not a trick to charge $20 for something that you could sell for $15.

    The biggest takeaway here is that when it comes to pricing people vote with their wallets, so if more people are buying you must be doing something right.

    The nice thing about these strategies is that they can be mixed-and-matched to find the best effect. Try them out and experiment to find how to get customers to buy more.

    Don't be afraid to switch things up everyone once in a while. Just be sure to keep track of what you've done so that you have numbers to back up the experiment.