‘Priceless: The Myth of Fair Value (and How to Take Advantage of It)‘ by William Poundstone references a wide variety of studies demonstrating that consumers are unable to accurately estimate fair prices and are “strongly influenced by the unconscious, irrational, and politically incorrect.” The gist is that prices are very abstract, and our interactions with pricing reveal us to be extremely irrational and can be easily manipulated. Basically, pricing is purely subjective, we are very susceptible to suggestion and people are able to recall only a limited amount of information at one time. As a result, people tend to judge value by starting with a baseline number and adjusting as they incorporate more information.

I recently read an article exploring how psychology and consumer behavior studies have influenced the restaurant industry, particularly menus. Essentially, the restaurant business is a commodity market – customers are making choices based on how those commodities are prepared and presented, and their experience as a customer. As I made my way through the article, I considered how these tactics could be applied to an array of industries, from franchises to event marketing.

Most of us are familiar with pricing with 5 or 9 as a way to get consumers to round down; but have you noticed that many menus (especially at higher-end restaurants) no longer include a dollar sign beside its items? A simple $ literally indicates the cost, right? Its absence can soften the pricing, which can lead to a greater spend by diners. This simple method can be applied to not only to menus, but to hang tags, pricing sheets, proposals, and so on, particularly when selling higher-priced products or services.

Another menu design choice is related to placement, or anchoring. Buyers are sensitive to contrast, so a high-dollar (low-volume) item may be placed next to a (still high but) lower priced item, which makes it look like a value in comparison. The power of anchoring is visible in everything from plaintiffs’ lawyers demanding outrageous sums for pain and suffering to stock market bubbles to the four-figure ice cream sundae. Pair anchoring with well-written descriptions of your offerings, and your customers will respond accordingly.

Lastly, bundling. High-end restaurants offer prix fixe menus; fast food joint have combo meals. This concept translates across industries so easily: goods and services are often bundled so that customers can quickly select the most frequently paired offerings. By bundling, you can recoup on lower-margin items by packaging them with those that have higher margins. Without line item pricing, your customer needn’t worry about the particulars – decision-making is simplified.

Let’s take this a step farther: it’s not just about the price, it’s about the value. So, in a commoditized market, how do we proclaim our value? We differentiate ourselves with exemplary customer service. We’re proactive. We demonstrate thought leadership. We share how we’ve delivered outstanding ROI for our customers/clients. We also package our products and services so that those most frequently selected are easily found and chosen by our customers. We make it easy. And if a customer wants to unbundle, we price accordingly.

This is as true for our technology and retail customers as it is for Actio.

Pricing is a richer subject than you might imagine. You may be surprised how many parallels you see with your own pricing strategies, and how many innovative practices you can learn from restaurateurs. It makes sense to sell with a focus on the value, benefit and ROI of the products delivered… and certainly side-by-side comparisons don’t hurt.