{"id":20075,"date":"2022-05-09T10:25:36","date_gmt":"2022-05-09T10:25:36","guid":{"rendered":"https:\/\/www.openbusinesscouncil.org\/?p=20075"},"modified":"2022-05-09T10:25:36","modified_gmt":"2022-05-09T10:25:36","slug":"how-do-behavioral-pricing-and-behavioral-economics-serve-businesses","status":"publish","type":"post","link":"https:\/\/www.footballthink.com\/how-do-behavioral-pricing-and-behavioral-economics-serve-businesses\/","title":{"rendered":"How Do Behavioral Pricing and Behavioral Economics Serve Businesses?"},"content":{"rendered":"
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Psychology plays not the last role in understanding how consumers make purchasing decisions. Find out how understanding customer psychology creates the prerequisites for behavioral economics and behavioral pricing, which can be translated into profitable pricing strategies.<\/span><\/i><\/p>\n Behavioral pricing helps understand what motivates people to purchase one product while avoiding others. Knowing how to distinguish can make a difference between a successful and unsuccessful pricing strategy. Stay with us and explore the world behind behavioral pricing and behavioral economics. <\/span>After reading the piece, you will get valuable knowledge and practical tips for using behavioral pricing to its full potential<\/b>.\u00a0<\/span><\/p>\n Behavioral economics set the scientific foundation for behavioral pricing. <\/span>It examines various psychological factors guiding consumer behavior toward particular purchasing behaviors<\/b>. In most instances, the studies offered by experts in behavioral economics can be used to formulate and predict the process of people making economic-based decisions. From such a perspective, insights from behavioral economics help better understand economics as a whole.<\/span><\/p>\n When narrowing down the phenomenon of behavioral economics, we arrive at the concept of behavioral pricing. <\/span>The idea entails setting product prices based on available information on customer behavior patterns and purchasing decisions. In other words, behavioral pricing takes the insights from behavioral economics and transforms them into viable pricing strategies<\/b>.\u00a0<\/span><\/p>\n Interestingly, the origins of behavioral pricing date back to one of the founders of capitalism, Adam Smith<\/a>. W<\/span>hile the initial understanding of purchasing behaviors was linked to the idea of justice, with several hundred more years of research, the experts found many more psychological pinpoints affecting people’s purchasing decisions. <\/span>With the arrival of big data and the digital era, companies received a vaster amount of metadata that helps better understand consumer psychology<\/b>. At this point, nothing tells better about behavioral economics, like real-life examples.\u00a0<\/span><\/p>\n To further understand the logic behind each given an example, you should consider one of the primary premises of behavioral economics. The theory dictates that people are often motivated by irrational factors in their purchasing behaviors<\/a>. Interestingl<\/span>y, the more their decisions are irrational, the higher likelihood that individuals will look for some objective justifications for their initially irrational choices. It means that rational beings do not always make rational choices when engaging in consumerism.\u00a0<\/span><\/p>\n Companies like Apple Inc. always use behavioral economics in their pricing decisions. For instance, when the firm introduces its new iPhone, it always, I repeat, always sets higher prices for a product. The introductory price can be about <\/span>$800<\/b> with its further reduction to <\/span>$600<\/b> or even <\/span>$500<\/b> after several weeks. <\/span>Why the company does it? <\/span><\/i>The simple answer is that the company sets an unreasonably high price to create later an impression that $600 is a very good deal. And the approach works. Apple Inc. understands consumer psychology and makes people believe they receive a great deal, while there are no rational factors supporting that.\u00a0<\/span><\/p>\n Apple Inc. spends millions of dollars on research of consumer psychology. It is a long-term investment that helps \u201cmanipulate\u201d how customers perceive Apple\u2019s products. Yet, if done correctly, everyone wins. A customer receives their satisfaction from the \u201cgood deal,\u201d and companies get their profits while boosting sales volumes.\u00a0<\/span><\/p>\n Behavioral pricing already helps businesses to boost revenues. However, it is important to know several tricks to get the most from behavioral pricing. Here are <\/span>six tools<\/b> any company can use to propagate behavioral pricing:<\/span><\/p>\n There is a high chance of finding one of the instruments beneficial and applicable to your case. Yet, you should remember to avoid manipulation and exploitation of consumers. Try to find the approach that will create a win-win situation, and you\u2019ll see how fast your business will thrive.\u00a0<\/span><\/p>\n Technological advances offered the world algorithms that can bring pricing to whole another league. Analysts used manual calculations to determine the best pricing approaches in the past. Now, it can be done with several clicks and good software. For instance, dynamic pricing software helps find the best pricing solutions based on the variables a user presents. You just type in the prerequisites, and the software analyzes your case across different pricing libraries to recommend the best pricing strategy for your situation.\u00a0<\/span><\/p>\n With further integration of artificial intelligence, machine learning, and cloud computing, the effectiveness of behavioral pricing will grow exponentially. With access to a myriad of data points on consumers, the machines can present pricing decisions that would have required years of manual calculations in a matter of minutes. Behavioral pricing will remain effective. People do not like to change their purchasing habits. Besides, they often cannot do that because irrational urges drive many.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Psychology plays not the last role in understanding how consumers make purchasing decisions. Find out how understanding customer psychology creates the prerequisites for behavioral economics and behavioral pricing, which can be translated into profitable pricing strategies. Behavioral pricing helps understand what motivates people to purchase one product while avoiding others. Knowing how to distinguish can […]<\/p>\n","protected":false},"author":7,"featured_media":20077,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":""},"categories":[3585],"tags":[],"acf":[],"yoast_head":"\nThe ideas behind behavioral pricing and behavioral economics<\/strong><\/h2>\n
An instance of behavioral economics in real life: The case of Apple Inc.<\/strong><\/h2>\n
Tools for effective behavioral pricing<\/strong><\/h2>\n
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Behavioral pricing and automation<\/strong><\/h2>\n