What ACTUALLY Makes People Buy Things (Pricing Psychology Explained)

In this video, we are going to talk about the psychology of why people buy. Every single day, whether you shop online or shop in real life, you are inundated with tricks from $9.99 as a dollar value, to sample packs, to marketing tailored specifically to you without you even knowing it. And all these are tools in any brand or marketer's toolkit that they can use to better perform in their business. And it's also things that every consumer should be aware of so you understand how you're being sold to and more about why you make the decisions you make when consuming. In this video, we're going to walk through pricing strategies that will help your product sell more

and give examples of how pricing and product tie together to form brand strategy in all kinds of different niches. And then we're going to dive into personas, how to break your customers into specific segments and give value propositions right to them, and look at the technology stack to do that effectively. This is a super tactical video you can actually apply in your marketing career as a brand or really in any business. But as always, my video is really rooted in the sociology and psychology of why we buy, why we think, why we consume, why we love the brands we do. And I hope you'll have fun no matter what your background is.

There is a super comprehensive free download that comes with this. You can grab it below. It includes how to build personas, all the pricing tactics, even info on things like how to connect in your social strategy. And in the first week of May, our next community call, any questions you have, you can come dive in. There's a link to that below as well. Let's lock in. So first, I'm going to speed round through five pricing psychology techniques. And then we're going to get into some examples of how brands structure their product mix to take advantage of these. So the first concept is anchoring. The first number that someone sees on a page

reframes every number they see after it. This is why you will always see, when someone sells you something in software or similar, that they will have tiers of a high anchor on the right, a mid-tier in the middle, and a low option that often mostly exists to make the center feel justified or to get someone to buy in, to later upsell them into the other tiers. This is all about making the product feel reasonable by strategically pricing all three. And then retail does the same thing. Luxury stores don't stock a $900 candle because they think you're going to buy it. They do it to make the $200 candle seem affordable. And the anchor doesn't have to be your product.

It just needs to be in the frame. In a bit of a gray tactic, Keenst does this by actually listing the typical retail price that they position against with their lower price. And you'll see retail structures a lot like this. Best Buy will go in. You'll see almost every category they have, headphones, washers, TVs, have a good, better, and a best. Someone who just wants the price option can get the good. The best sells a lot rarer but helps anchor the price of the middle. And the middle tends to be a big selling category. Now let's talk about price as a quality signal because this is a big one and one I've had a hard time learning in my career.

People don't have perfect information about product quality. If you saw my videos in prior weeks where I talk about cashmere, you'll know that 100% cashmere can mean completely different things but still have the same label. And so on e-commerce, it's almost impossible to tell. This is why brands will use price as a proxy. You may think that with your brand, you want to offer people a deal. You're going to give them an excellent product at an excellent price. But the problem is the perception based on price may be that your product isn't actually excellent. So a lot less people will even make the choice of buying it to understand. I look at this in streetwear.

People always ask, how do these brands sell $400, $500 shirts? In fact, as someone who sells $80 shirts, I'll get a lot of people that will say, that seems too expensive, $80, $100 shipped. But there are better quality shirts than the 500. But the boutique owners and the buyers especially will go, it's a sign that something is of a specific level of designer or a specific level of value just to be priced in that range. Of course it's a tell-dee. Of course it's not a blank. And the positioning any lower than that, you're actually lowering the customer expectation and you may never even get a chance to exceed it. This makes sense. This is a reasonable heuristic in a world

where people can't try everything before buying. Price things in an expected way. And know that underpricing is a brand problem, not just a margin problem. Then we have charm pricing and rounded pricing. So $9.99 versus $10. The difference is one cent, but the psychological difference is actually much bigger. Prices ending in nine consistently drive higher volume. This is true in mass and value categories. But in premium and luxury categories, the opposite is true. The rounded number. The $10 says, we're not trying to trick you into thinking that $9.99 is a good deal. We know you're smarter than that. And you will see that play out in a lot of luxury versus value brands.

And at the same time, you have what we call lost price points. $69. There's a reason why everything is $59 or $99. If you go all the way up to $79, you might as well be $99. $69 is so much more than $50, you're looking for a $49. There are little things in there where you'll notice and people gravitationally pull towards some of these price points that make sense for them. So now let's get advanced and let's talk about pricing as it relates to product and what different products do to fill in the consumer experience as a full product mix or how all the products in a brand work together. We'll get some concrete examples. So for instance, when you go into an ESOP,

you'll notice they have affordable products, $27. You can get a hand soap in the store. It's really expensive for a hand soap, but it's cheap for ESOP overall. This is what we call an entry-level product. It gets you into the ecosystem. It's low risk, it's high trial. They want to make sure you have a banger for that low-price product so that they want to then buy more because they had a good experience with it. And then you'll get the core product, the thing most people actually buy, the real business. So for ESOP, a lot of that is $60 to $100 skincare, expensive premium skincare, an actual repeat business that people buy into. And then you'll have aspirational SKUs,

dream pieces that sell very little but help anchor the brand and move everything else. If you've ever gone to a brand page and there's a lot of denim and shirts but they have a $2,000 jacket, that's an aspirational SKU. And then for ESOP, they have $200 kits and fragrances. Position ESOP as a luxury, not just a nice soap, by really getting into higher price points. And they don't even take full advantage of this the way some of the brands that we're going to talk about do. And with them, that store experience helps close the deal, right? And then we'll go into halo products. These might not even be for sale. So for instance,

Palace had a car that they put inside their chute. They listed it for, I think it was like 40 grand or something. You could actually buy the car. District Vision, when they launched Cycling, had a $10,000 bike. It'll be like a one of one. No one may even buy it, but it exists to define the ceiling of what the brand could be. And all of these work in concert to build an effective product mix. And you'll notice if you build out your core product and you have success with it, you begin playing in some of those other categories and end up driving more sales to the core. One of the perhaps legendary examples is this, when Oreos started doing all these legendary collabs, right?

Where they were doing Swedish Fish Oreos, crazy flavors, Lady Gaga Oreos. And what they found from the data is those collabs sell a little bit or the flavors sell a little bit, but they drive way more sales of the mainline Oreo. They bring people over to the shelf. They get people talking about the brand, and they might laugh and buy a vanity product once, but they buy more Oreo overall. Apple, they execute this to a T, as you would expect. Entry level, the iPhone SE, the AirPods, low barrier and you're in the ecosystem. And you have the core, their iPhones, the MacBooks, the Airs, the majority of the product. The Neo, for instance, is a new entry level for them.

Then you have aspirational, the MacBook Pro, the Pro Displays. People buy a lot of the aspirational products, but they're not for everybody. It positions Apple as a professional tool you're buying into even if you get your Air. And then the halo is stuff like the Vision Pro. It exists to say that this is the future and they're investing in it. but they drive way more sales of the mainline Oreo. They bring people over to the shelf. They get people talking about the brand, and they might laugh and buy a vanity product once, but they buy more Oreo overall. Apple, they execute this to a T, as you would expect. Entry level, the iPhone SE, the AirPods, low barrier,

and you're in the ecosystem. And you have the core, their iPhones, the MacBooks, the Airs, the majority of the product. The Neo, for instance, is a new entry level for them. Then you have aspirational, the MacBook Pro, the Pro Displays. People buy a lot of the aspirational products, but they're not for everybody. It positions Apple as a professional tool you're buying into, even if you get your Air. And then the Halo is stuff like the Vision Pro. It exists to say that this is the future and they're investing in it. It makes a $1,600 phone feel reasonable, whether the Vision Pro works or not. Over in luxury, we've got L'Oropeana. Entry level,

$400 to $600 cashmere accessories, scarves, beanies, small leather goods. They sell a lot of these because people want to buy into the brand, but they can't afford the core. The core is frankly ridiculous. $1,500 to $3,000 sweaters and outerwear. It's for very few people. There's a lot of people that will flex their way up to that one beanie or scarf, a pair of shoes even. And then aspirational, you'll have the Gifted Kings wool, the $12,000 jacket. That just exists to help anchor the $3,000 products. You don't need luxury prices to do this. Glossier is another great example. Their brow product at $18 gets someone in. Skincare at $35 keeps you, and then they upsell

into fragrances at $75. It makes them a brand. They do many things. You can live their experience. And so a lot of brands make one of two mistakes. One is they build too many too quickly. First, you need to build your core, get something people want to buy, and then hit some walls before you start thinking through all these other things. Or the second is they only build the middle. They only build that core. There's no entry point to help easily acquire new customers, or they only do that entry point with sale on core. And there's no aspirational tier, nothing to anchor your prices against, nothing for people to believe there's something bigger.

And if you take this approach at any level, whether you're a designer, whether you're a marketer, you work at a brand, launching your own products, and whether you're just consuming, you now understand the ladders of how you engage. But now, to really put this into impactful tactical stuff that will help you crush it at work, I want to talk about personas. So what do I mean by that? I mean the customers of your brand fall into categories. They fall into groups based on similarities of their demographics, like their age, their race, their location, and their habits: how they buy, how they consume online, what they listen to, what they follow.

By understanding those personas, you can better craft messaging, you can better design products, you can better look at collaborations and marketing and content. It informs everything. And so traditionally, what would happen inside marketing companies, I've been a part of this process a hundred times, people would map those personas out on a whiteboard, list them out with a marketing agency, do this big exercise, but they would mostly be made up. If they did get data, they would go and they'd pay for surveys, right? But you gotta understand, the only people that actually do a paid survey for a brand are generally one type of customer. And even if you got

those couple thousand, it's just so heavily skewed, and people really rely on that data. And you'll see people that are really in touch with the consumer, the street team or the marketing or people on social or customer support, be like, it's not quite right. But now you can get way more tactical. So one of my absolute favorite pieces of software, not a sponsored video, just something that I use and believe in that I'm trying to get them to let me invest in, is called Outer Signal. So what this does, it goes through your customer base in Shopify or your email list and builds your personas for you based on the actual data. So when I found this, I was using it

for something different. So one of the other things that they do, they just analyze your customers as they come in. So for instance, if I got 133 orders, like you'll see inside this screenshot in the last seven days, it will tell me, okay, seven of them are ultra high net worth, six of them are influencers, three are industry experts, two are relationships to me or the team somehow, two have media or content businesses, and it'll actually give me their information. So this is a great tool for actually hunting down influencers to represent your brand or to make your UGC content because they probably already have them in their customers. That's how I found the tool,

but now what we use it for a lot more is these segments. So for instance, this brand is broken down into high-performance executive, affluent health investor, wellness professional, athlete, biohacker as key personas, and it shows the percent of their customer base. 14% of their customers are high-performance executives, 10.8% are affluent health investors, et cetera. It also shows the difference in their LTV, their lifetime value, how much they buy from you. This matters. This is what you start to get into the sweet spot of what you can do with messaging. How often do they repeat? That all gets put inside this data set. You can actually build your real personas out.

You can say this is the real data from our customers online or from our email list. So related to cloud workflow, I want to talk about Granola, who I've partnered with on this video. If you're in a lot of meetings, you probably use your AI note taker or have someone on the team that does. And a lot of times you'll find that what you've actually done with that goes nowhere. So I use Granola to connect my meeting notes to my real workflow, and it's been invaluable. So let's talk about it. Granola is the AI notepad that transcribes your meetings in the background without a bot joining the call. No weird robot participant in Zoom. If you've been in my Cut30 chat,

you've heard plenty of jokes about that. But it listens directly off your computer audio across every platform or on your phone for in person. You can jot a few notes if you want it, fill in everything around them, or you do nothing. You come out with clean, structured notes, action items, and a searchable record of the whole conversation. But the part that changes my workflow is the MCP integration with Claude. Granola connects directly in Claude, which means your meeting notes become live context inside of it that you can ask in any chat. You can reference it, or you can just pull up the notes. You're not hunting for it. You don't switch tabs.

You don't hunt down a transcript and copy-paste it. It is there. Claude knows what's discussed, and there's a connector there and there's a ChatGPT app. I just happen to use Claude more, and they're both for Granola. Once you set this up and give it permission, which is a super easy process, you can just query your chat, bring up the date or just a topic that was discussed, and it's going to find it. It's super useful for bringing up things in the past you only have light context for. Remember when we were talking about that photo shoot, or what was the plan for the social post? I even use it to suggest video ideas for me personally based on conversations

I've had throughout the week. What were interesting topics? What did I talk about? What were questions people had inside my Zoom calls? The meeting feeds the work instead of just sitting in a folder somewhere. So, somewhat unrelated, but I want to shout out their use of a spoon as corporate merchandise. Clever. You can try Granola for free at the link below, and thanks to them for sponsoring this video. And so now what do you do with that in the modern era? So a couple of things. Because this is based on email, you can segment your email and SMS communications in software like Klaviyo or whatever you use to actually send different messages to those people

based on what they do, especially based on that lifetime value. If you have a category that only buys once and doesn't buy again, specifically work on targeting them to increase that LTV over time. If you have people that buy from you all the time, you're not marketing to them a lot, market to them more. Can you build that LTV out way higher by being more active? Those are the kinds of things you can test. And used to be with personas, you have to then brainstorm what the angles are. One thing I love, and I include in the guide that you can get in the free download, I have my prompt for this, bring this into Klaviyo. Bring all the information from your persona.

It's this person, they have this income, they're from these places, all the information you can download or get, and SMS communications and software like Klaviyo or whatever you use to actually send different messages to those people based on what they do, especially based on that lifetime value. If you have a category that only buys once and doesn't buy again, specifically work on targeting them to increase that LTV over time. If you have people that buy from you all the time, you're not marketing to them a lot, market to them more. Can you build that LTV out way higher by being more active? Those are the kind of things you can test. And used to be, with personas,

you have to then brainstorm what the angles are. One thing I love, and I include in the guide that you can get in the free download, I have my prompt for this: bring this into Klaviyo. Bring all the information from your persona. It's this person, they have this income, they're from these places, all the information you can download or get, put it into a Klaviyo project. Use the prompt that I have that describes how to create marketing copy. It's designed to create marketing copy. And what you do with this, with this specific project, which again is a collection of information about the persona, any brand or product materials you can add in.

And then the core of this prompt is the project description that you're a copywriter who thinks a certain way, like a certain marketer. You can adjust any way you want. Now you can do three things. You can write copy for your landing pages, your emails, and SMS, and your ads based on this. That's number one. Number two, you can design the messaging for your products overall to be in tune with your customers. And then three, you can decide how to segment, because just because you have four or five personas doesn't mean you need four to five messages. Ask the all-seeing cloud oracle, what message would appeal to multiple? What messages should we segment

when we're launching a product that has this value proposition? How does this message stack up against competition, and it will research it? Now you're able to do actual interesting marketing. And so what do I mean by the copy that we get to in the front? So every e-commerce experience, and also every experience of buying a high-ticket product or a service or from an agency or a piece of software, comes down to the ad that gets the person there. So what is the content you put in front of them? What are the messages you can test? What are the pain points people have? Ask that cloud project for these people's pain points relative to your product.

That's going to give you ad ideas. But most important is the landing page. They land somewhere where you have to sell them with the copy, a headline, a subheadline, some bullet points on why they buy, some frequently asked questions, maybe a video. And doing that by persona is going to work way better because, guess what? The wellness professional that we saw inside this here who's buying something for their job is very different than the biohacker who's trying that same wellness product because they want to work on themselves. And if you have two separate landing pages for those and the messages are great, your conversion rate's going to raise. And guess what?

Writing that copy with something like this, putting it into a platform, you can do landing pages inside of most email providers, you can do your landing pages directly in Shopify, there's software like Replo and Fermat, you can do it in Framer if you have an agency website. Whatever it is, just spin up another lander. It's a quick thing. Once you build one lander, and you already have your placeholders for your copy and for your images, just duplicate it and swap it out with the new ones, and you will raise your conversion rate. And the last one is the email. You're sending out a new campaign, you're doing an automation sequence, you can build segments

based on these personas automatically. And so you may have someone who needs more touches, they need more touchpoints to sell, or someone who needs a longer-form message. Again, the professional versus individual consumer is one of the most blatant ones. That's not even, that's a huge persona rift of I'm buying this for work versus