Psychological pricing is a valuing strategy that considers how people think and perceive product prices. The strategy’s idea is that specific prices can psychologically affect consumers, making them more likely to purchase a product or service. Many businesses use this method to increase sales and profits, though its sustainability can vary depending on its implementation.
There are several ways to use psychological pricing, though they all aim to influence how customers perceive prices and urge them to purchase.
Different Ways to Attract Your Customers
One of the methods is charm pricing. For instance, you sell an item for $9.99 instead of $10.00. The price difference may seem insignificant, but it impacts how people perceive it. Customers may be more likely to purchase the product because it appears cheaper.
You can also nudge customers into buying your desired product by putting a decoy item that’s priced slightly lower. Businesses typically use this method by presenting a buyer with three similar products of different tiers, each with an increasing price.
The smallest option is usually the cheapest, while the largest is the most expensive. The decoy looks like an in-between item but is priced significantly higher than the smallest and only slightly lower than the most costly. Because the difference between the decoy and the premium product is slight, customers believe spending a little more will get more bang for their buck.
Another way to use psychological pricing is offering huge discounts at certain times of the year for special events or running a sale with many items priced down. These offers can make customers feel like they’re receiving a good deal and are more likely to purchase one or several products to feel that they are getting value.
Offering discounts can give people a sense of urgency and make them act. However, artificial constraints like a one-time or limited-time sale can make customers feel they’ll miss out if they don’t take advantage of the offer. This could lead them to make several purchases, especially if you offer free shipping if they meet a minimum purchase amount.
Instead of just discounts, businesses can also implement innumeracy, which is like illiteracy but with numbers.
Innumeracy operates on the idea that customers also want free items without accounting for how the business prices their products. This tactic includes specials like “buy one, get two items free” or “earn 10% cashback.” But, most of the time, customers still pay full price even if they think they’re getting a free item.
Help Your Customers Make Up Their Mind
Overall, psychological pricing is a powerful tool businesses can use to increase sales and profits. Understanding how people think and perceive prices will allow you to take advantage of and implement these insights into your marketing strategies.
It’s also important to remember that there isn’t one correct way to approach psychological pricing. Experiment with and combine different methods. Keep testing to learn the best way to optimize the value and price of your products.
For more in-depth information on psychological pricing and the different methods businesses use to employ it, check out the infographic below.
