Good morning!

This week’s featured article is a published chapter from the 2024 Behavioral Economics Guide, holding a suite of practical pricing tactics that adapt to economic inflationary pressures without eroding consumer trust.

As a true behavioural economic edition—this read will have you sitting on the sparkly side of the applied behavioural sciences and for that, I warn that margins of error will require further investigation within your day-to-day context.

The findings

📈 Price perception is as important as the actual price.
Consumers tend to anchor perceptions to prices from the past and are more sensitive to increases than decreases. If a price goes up, perceived fairness is what will rule buying behaviour.

🛍️ Reframing can soften the blow.
How you frame price changes—such as linking increases to improved value or product enhancements—can make the adjustment more palatable. It’s all about the narrative.

💡 Bundle wisely.
Rather than increasing the price of individual products, bundling services or products together can obscure the individual cost increase while enhancing perceived (and actual) value.

🌍 Cultural differences in price sensitivity.
Regions where the cost of living has been rising steadily are more sensitive to inflationary pressures. Tailoring your approach by region is crucial for maintaining customer loyalty.

💰 Temporal discounting remains a powerful tool**
Offering deferred payment options or small, time-sensitive discounts can help mitigate the short-term sticker shock of inflation-driven price increases.
 
**Temporal pricing strategies are very effective and for that reason, I must advise that it is used with caution. Overspending erodes one’s social and financial infrastructure—so only use this tool if you’re selling a product or service that enhances the betterment of someone’s life.

Why it matters for you

• Perceptions create the foundations for reality. Keep this as a core design principle and you’ll remain within a framework that is reasonable and effective.

• Inflationary pressures challenge pricing and product teams to remain profitable while preserving consumer sentiment, but it can be a strategic tool if your pricing strategy reflects value creation rather than cost burden.

• Unilever and Procter & Gamble have successfully navigated inflation by re-framing price increases as part of their premium product positioning. Meanwhile, Amazon has leaned into bundling services (think Amazon Prime) to manage consumer expectations around price changes.

What you can do about it

• Invest in transparency and how change in value justifies the price change.

• Bundle creatively by combining complementary products or services to maintain perceived value.

• Frame price changes as investment by shifting the narrative from "cost increase" to "value investment."

• Test pricing in micro-markets
  Use A/B testing in different regions to measure how consumers react to price adjustments.

Have a productive week!

M

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