Psychological Price: Have you ever walked out of a store with more items than you planned to buy because you found sales that seemed irresistible? Don’t worry, it’s common and is due to the psychological pricing strategies that some stores set up to encourage us to buy more.
These are usually prices like $3.99, which seems much lower than $4; customers translate it as $3, as they tend to process the price from left to right. That is why they give less importance to the last digits in the price.
Pricing strategies are a fundamental part of marketing and represent a guide to increase sales and grow your business. Establishing a pricing strategy that favors you is key to achieving the sales goals you have set for yourself.
What is a psychological price?
Psychological price is a business practice used by stores to set prices lower than a whole number. This strategy is based on the theory that there are certain prices that have a greater psychological impact on customers than others.
The psychological pricing strategy focuses on consumer emotions. The value they perceive of a product or service has a significant impact on their buying behavior. Consumers are governed by their thoughts, motivations and needs, so their decision process is usually volatile and dynamic. In this case, social influence is key when responding to psychological price.
In general, prices represent automatic connections with consumers, which can provoke positive and negative reactions. Thus, generating an effective pricing strategy can increase the sales of your business and attract more customers.
Why do psychological pricing work?
In a study carried out by the University of Chicago and MIT , they tested the effect of the rounded digit. The prices were set at 34, 39 and 44 USD. The best selling items were those priced at $39, even though there was a lower price.
This is why the “factor 9” pricing strategy is one of the oldest and most widely used pricing practices. As we said at the beginning of this article, consumers perceive that prices with 9 or.99 at the end are often better deals and cheaper than whole numbers.
Psychological price is a designed strategy that directly influences consumer behavior and purchasing decision through emotions. A study has highlighted that certain ways of setting prices can trigger a response in a customer’s subconscious and encourage their purchase from her.
That is why we give you some tips below that can help your psychological pricing strategy have positive results.
6 Strategies To Create Psychological Price
Psychological pricing, in addition to being an easy and inexpensive strategy to implement, also increases the effectiveness of your pricing strategy. Below we share some points that you can take into account when creating your strategy.
1. Avoid whole numbers
This is one of the most used techniques in the psychological pricing strategy; in fact, few companies use rounded numbers to set their prices. The use of digits gives the consumer an idea of a reduction in the normal price and, therefore, an illusion that he is paying less.
2. Differentiate the cost of shipping costs
You can reflect the price separately, that is, show the cost of the product that is usually less than what it will cost with shipping. However, at some point in the purchase you must show the total cost, before the sale is finalized. This strategy attracts more customers interested in your product and distances them from the competition.
3. Divide the total cost
If you divide the total price of your product or service into deferred installments, it may be more attractive to consumers. This strategy works when the cost of the products is very high: it is not the same to see that the price for an all-inclusive trip to the beach costs $12,500 or to know that you can cover the fee in 5 monthly payments of $2,500.
4. Establish fixed prices for periods
This strategy is very common for streaming services, such as Netflix, which has a fixed monthly cost for the use of their service. In this way, the consumer gives less importance to the impact of paying for this service over a longer period and does so for a fixed monthly fee.
In this case it is important to be clear with the specifications regarding subscriptions and cancellation of plans. A good price offer can be affected by poor communication of the legal terms that could decrease your sales.
5. Highlight discounts
If you have made a discount on the original price of your product, it is important that you highlight it so that the consumer can see it. When a customer realizes the savings that buying that product entails, he will understand the benefit of his purchase and will not hesitate to spend on it.
The order of the numbers is important, as is the color and size of the font. For this reason, the final price must exceed the original reference price. If you want consumers not to be confused and have a positive understanding of your message, position prices in the right place and way.
6. Use percentages
The percentage is a resource that helps highlight product promotions. This allows consumers to compare offers regardless of price. Remember to specify what the savings percentage is.
Examples Of Psychological Price That Work
Seasonal sales and great deals are some of the examples where psychological pricing is used to attract consumers. Here are some paradigmatic cases:
1. Walmart (Black Friday)
The phenomenon that represents “Black Friday” is a great example of how psychological pricing is used for consumers. This sale is annual, specifically on Thanksgiving Day in the United States, and is designed to attract the largest number of consumers to the stores.
For Walmart consumers, “Black Friday” represents the day with the best deals on the market. This is due to its good psychological pricing strategy that manages to sell products out of season or that have not yet been released, as a section.
Black Friday deals are marketed as “limited time,” making for even bigger sales. Fear of missing out on an incredible deal drives consumers into stores this season for products they might not otherwise be able to purchase at other times of the year.
This phenomenon is called “impulse buying” or ” impulse buying “; and it occurs when there is a psychological influence that encourages consumers to buy another item, after a previous purchase. It’s the way many stores attract millions of people to shop this season: perhaps consumers who came there because of an attractive offer end up buying more products that they did not contemplate.
Amazon, the leading online sales store, manages to translate the psychological pricing strategy into its sales process. For example, use the savings percentage; This makes it clear to the consumer how much they are saving compared to the original price. With this, it encourages consumers to make the purchase, which represents an advantage for their economy; it even imposes an established time limit to take advantage of the offer of the products.
Amazon’s item price psychology strategy helps you generate more sales, since the price of each item represents not only the interests of the company, but also the interests of the customer. This reflects a win-win pricing model.
Apple is a brand that uses psychological pricing all the time. Together with a strategy based on the exclusivity of its products, which are aimed at a public that consumes high-end technology, it achieves overwhelming success: it has a 22% market share in smartphones, 16% in mobile operating systems and It ranks as the third most popular personal computer brand.
When you pay attention to the prices they offer on their website, you will see that they are behind a long list of features and benefits of their products. In this way, he manages to transmit a sensation of greater cost-benefit to the visitors of his shopping site.
Shein is a fashion and lifestyle retailer that currently reaches over 150 countries. Their pricing strategy is clear from the moment you visit their website, as you are greeted with discounts, promotions and, unsurprisingly, psychological pricing based on factor 9.
In the same way, every day there are exclusive or limited-time promotions that make visitors not want to miss out on the offer and thus encourage their purchase.
5. New York Deli
One of the strategies that brands use to stand out is the so-called prestige price. This is very functional since many consumers consider that if a product is more expensive than another similar one, it is surely better. Therefore, companies raise prices on certain products so that customers perceive them as higher quality compared to others.
Here we can see a clear example of the prestige price of the bread brand New York Deli, whose products are considerably higher than those of its main competitor, despite the fact that the quantity or style is not that different. This manages to attract consumers who want better quality and feel that they are buying a prestigious brand.
Rexona, like many other brands sold in supermarkets and online, makes use of a psychological pricing strategy, known as round pricing.
The objective of the round price is to include a closed price so that the consumer does not have rational doubts about their purchase. However, many times this type of purchase is considered more emotional, since it is about acquiring something that perhaps is not really urgent.
We have seen this type of strategy many times and surely you have also fallen for it. How many times have you gone to the supermarket and found “1 for $7.00 and 2 for $10.00” deals? This seeks to make your subconscious think that you are spending less.
In alliance with the brands, the department stores make use of the round price in different products so that the consumer buys more, for less. Although there is a good intention to save, on many occasions, you do not require two identical products in a single purchase.
As you have seen, psychological pricing strategies must be applied with one guideline in mind: the benefit of your customers. These tactics can also help you boost your sales, but always put your offer data and features in plain sight (no surprises!).
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