The Science Behind Psychological Pricing

Strolling through supermarkets and superstores, carrying your cart with products, out of which half is not required? Well, you just fell prey to psychological pricing!

Psychological pricing is a trap; even if you know it, you fall for it. The psychological pricing strategy encourages you to spend on things you do not need or even consider spending. This article will discuss psychological pricing and how businesses leverage this strategy to benefit themselves. This blog may help you to save those extra bucks in the shopping mall.

Content

• What is Psychological Pricing?
• How Does Psychology Affect Buying?
• How Does Psychological Pricing Work?
• Types of Psychological Pricing Techniques
• 5 Successful Psychological Pricing Strategies
• Key Takeaways

What is Psychological Pricing?

A psychological price is a type of pricing strategy that captures the customer’s attention and uses their emotional response to encourage sales and serves to sell more without reducing costs.

Psychological pricing works because it is based on the theory that certain prices psychologically impact the consumer. Only a small reduction or even increasing some amount helps businesses achieve a great impact on sales.

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How Does Psychology Affect Buying?

The vast majority of the decisions we make in our day to day are unconscious. Shopping is also one of them. Neuromarketing studies how the perception of our environment affects our purchasing decisions, seeking to stimulate our senses to achieve more sales.

It has been shown that stores with a certain type of music, specific smells or the decoration of the premises can sell more since an emotional relationship is established to achieve this effect. Next time you visit a shopping mall and stand outside stores like Lifestyle or Shoppers Stop, notice how they use your olfactory system to attract you to the store.

How Does Psychological Pricing Work?

In Psychological pricing, businesses go for the strategy that always works, which is charm pricing. In this case, the sellers do not round up their prices but create an illusion that the prices are relatively lower. Since the customers process the prices of the products from left to right, they usually ignore the last few numbers of the selling cost. 

Charm pricing also works to keep the price within the defined pricing brackets. Even if the product cost is lower by Rs. 1 or 2, the consumer might feel the cost is relatively affordable, attracting more customers.

Related: eCommerce digital marketing strategy

Types of Psychological Pricing Techniques

There are several common types of psychological pricing techniques –

Odd-Even Pricing

This approach involves setting prices that end in odd numbers (e.g., Rs. 499, 995 or 999) rather than even numbers (e.g., Rs. 1000). The belief is that customers perceive odd prices as being significantly lower than they are. In this case, these numbers convey perfection and make the customer believe their purchase is perfect.

Prestige Pricing

This technique is commonly used for luxury or high-end products. The prices are deliberately set higher than competitors to create an impression of quality and exclusivity. The assumption is that customers associate higher prices with superior products.

In the above image, you can see that you have got two different products in the same category. Still, the one with the higher price point, in this case, Apple, manages to attract consumers looking for the best quality and feel they are buying a recognized brand.

Bundle Pricing

Bundle pricing involves offering multiple products or services at a lower price than purchasing each item individually. This approach creates a perception of value and encourages customers to buy more items.

Price Anchoring

Price anchoring involves presenting a higher-priced option with the target product. If you compare, the target product looks more reasonably priced, making customers perceive it as a better deal.

Decoy Pricing

This strategy involves introducing a third product with an inflated price to make the target product seem more attractive. The decoy product is deliberately designed to be less appealing than the target product, leading customers to choose the latter.

Loss Leader Pricing

This technique involves offering a product lower than its cost to attract customers. Loss leader pricing aims to lure customers to the store with the discounted item, hoping they will also purchase other higher-margin products.

Price Bundling

Price bundling is a popular marketing strategy that involves grouping complementary products or services and offering them at a discounted price. This strategy encourages customers to purchase more items than planned, maximizing sales.

It’s important to note that the effectiveness of the above-mentioned strategies can vary depending on the target market, product, and industry.

5 Successful Psychological Pricing Strategies

In addition to being an easy and cheap strategy to implement, it increases the effectiveness of the pricing strategy. At this point, we share some strategies to take into account when applying the psychological pricing strategy in your business:

Avoid Whole Numbers 

This is one of the most used techniques within the psychological pricing strategy. Few companies use rounded numbers to price their products. The use of digits causes the consumer to have an idea of ​​a reduction in the normal price and an illusion of paying less.

Take Shipping Costs Into Account

This point is useful for e-commerce websites. You can reflect the price separately and show the cost of the product and what the shipping will be worth. However, at some point in the purchase, you must show the total cost before making the sale effective. Customers prefer to invest in a product where they do not have to pay shipping charges separately.

Divide The Total Cost Of The Product

It is recommended that you divide the total price of your product or service into deferred instalments to make it more attractive. This strategy is effective when the cost of the products is too high since seeing the price of a trip of Rs. 1,00,000 is not the same as knowing that you can pay for it in ten instalments of Rs. 10,000.

Establish Fixed Prices For A Time Period

It is very common to see this strategy on streaming platforms such as Netflix or HotStar, which have a fixed monthly cost for the service. Thus, the consumer gives less importance to the price of paying for this service over a longer period and does so for a fee. It is important to be clear in the specifications regarding subscriptions and cancellation of plans.

Point Out Discounts

If your products have the original price indicated, all the more reason it should have the discount. When customers realise they are saving money, they won’t hesitate to continue the purchase. 

Be clear with the order of the numbers, the colour, and the font size with which you will indicate these prices to avoid confusion.

Key Takeaways

• Psychological pricing strategies aim to influence consumers’ perception of the value of a product using specific price points.
• Psychological pricing leverages the anchoring effect, which is the tendency for individuals to rely heavily on the first piece of information encountered when making decisions.
• Price presentation can significantly impact consumer behavior. For instance, emphasizing discounts (e.g., “50% off”) can make the price seem more appealing compared to presenting it as a fixed amount (e.g., “Rs. 100 off”).
• Bundling products or services together at a single price point can create a perception of value and increase sales.

Conclusion

Businesses must implement psychological pricing strategies ethically and transparently to maintain consumer trust. These techniques can be powerful tools in influencing consumer behavior, but it’s crucial to use them responsibly and in alignment with business values.