The relationship between price and perceived quality has fascinated me for a long time. My master's dissertation back in 2013 was on this (see pictures).

In blind tastings, people who are told a wine costs $90 rate it as better than the exact same wine labeled at $10. Brain scans show the pleasure centers actually light up more for the 'expensive' one.

It turns out that price changed what people experienced!

Behavioral economists call this price-perception coupling. Price isn't only a cost. It's a signal of quality.

This is one of the most underused ideas for anyone selling online. Your prices actively shape how customers perceive your product and your brand.

There's a saying in Silicon Valley: you can compete on speed, you can compete on quality, but competing on price is a slippery slope. So when a D2C brand tells me their whole strategy is being the cheapest, it gives me pause.

Sometimes a low price doesn't say 'good deal.' It says 'lower quality.' Think about how we instinctively think about products from Temu or Shein.

Of course, it's not that simple. A low price plus a strong trust signal still wins. A no-name toaster at a low price with 10,437 positive reviews sells just fine. Price is read in context, not in isolation.

However, most brands set prices with fear. They look at costs, look at how competitors price, add a margin, and land on a number that feels safe.

I have to remind myself not to fall into this trap when pricing our own tools and contracts.

McKinsey found that for the average company, a 1% price increase can lift operating profit by around 8%. As a lever, pricing often beats another dollar of ad spend. But most brands are too scared to touch it.

If you run an eCommerce store, please test it. Take a $42 product to $44 and watch what happens to both your top line and your bottom line. How price-sensitive are your customers really? Try small tests across the categories you play in.

When you run a price increase, give it two weeks and look at conversion rate + revenue per visitor together. Conversion alone may put you off a change that's actually making you money.

Let your customers tell you what your product is worth.

I'm going to write a lot more about behavioral economics and how it applies to eCommerce and retail. I'm starting a newsletter so these don't get lost in the feed. If that's your kind of thing, I'll put a link in the comments to subscribe.