Psychological pricing can have incredible benefits for business. How you price your products and how you market them influences consumer choice.
Once you understand consumer psychology, pricing strategies become an effective way to sell more products at a higher ROI and liquidate your stock in a saturated market.
The goal of psychological pricing strategies is to persuade consumers to buy your product over a competitor’s. Pricing encourages shoppers to spend more than they originally planned, to feel like they are getting a good deal, and even to buy products they don’t need.
However, choosing the right strategy is important. If consumers feel they are being deceived, it can negatively affect a company’s reputation and image. This article looks at the pros and cons of psychological pricing and discusses tactics that actually work.
Definition of psychological pricing
Psychological pricing involves setting the price of a product in such a way that it is attractive to consumers.
An obvious tactic is promotions and sales. Common strategies include lowering the price of an item so that it costs 0.99 cents. In the second half of the 20th century, pricing experts discovered that £1.99 was much more attractive to consumers than £2 and consistently increased sales.
Other common strategies include ” buy one, get one free ” offers and charm prices ending in 9 or 5 while revealing the original cost of the item.
The key idea behind psychological pricing is to simplify the decision-making process among consumers and make them think that they are getting a good deal or at least making a purchase that offers good value for money.
To make psychological pricing work in your favor specific database by industry , you need to understand what motivates people. Let’s take a closer look.
Why Every Business Uses Psychological Pricing Strategy
Most pricing methods that appeal to the puma, chasing adidas and nike consumer psyche are not long-term strategies. They are usually suitable for retailers and e-commerce business owners who rely on quick, one-time sales.
However, at some point every business will start using some form of psychological pricing strategy. It is unavoidable.
If your e-commerce business is not retail, a smart pricing strategy would be to add value to your offering rather than offering discounts. Companies that offer value propositions are also trustworthy.
Pros and Cons of Psychological Pricing
Each pricing strategy has its own advantages and disadvantages – that’s why there are so many of them. In turn, psychological pricing is no different.
When implementing a pricing strategy, it is dating data important to understand how it can affect your brand reputation and image. Consider the advantages and disadvantages of psychological pricing below to avoid damaging your company’s reputation.
Advantages
- increase in sales volume;
- increasing the return on investment (except during sales periods);
- creating brand awareness;
- increasing product awareness;
- building a reputation for offering good value for money;
- increasing competitiveness in the market.
Flaws
- the need for consumer demand;
- price fluctuations can lead to brand unpredictability and unreliability;
- the desire of consumers to demand lower prices;
- short term solution.
Examples of psychological pricing
The benefits of adopting psychological pricing strategies outweigh the disadvantages. However, it is appropriate to use smart pricing strategies that are not perceived as deceptive.
There are over 40 psychological pricing strategies and subsets. Not all strategies will work for every eCommerce business owner, while others are standard practices that you are probably already using, even if you didn’t realize it was a true psychological pricing strategy.
Listed below are a few psychological pricing strategies that are ideal for eCommerce business owners. They can help increase conversions and provide a higher ROI – all without damaging your brand reputation.
1. Perception of numbers
Price perception plays a significant role in consumer purchasing decisions. For example, should a sale price be advertised as 50% off or buy one get one free ? It would be natural to suspect that a classic buy one get one free (BOGOF) campaign would be more successful, even though the offer price remains the same? However, in split testing, offering 50% off has a higher conversion rate than offering the second product for free. This is where psychology in the consumer’s mind comes into play, because they are still paying full price for one of the items, and ironically, this outweighs the price of the free one. The 50% off is perceived as a full discount and therefore a better deal.
2. Value for money
The value for money strategy gives your brand recognition among customers. However, it is one of the most difficult pricing tactics because you need to understand your market and make sure you have a product that truly offers value for money. If your product is marketed as one of the best on the market, you can use this advantage to sell it at a higher price. In fact, a value for money pricing strategy plays on the ego of consumers who want to appear as if they are investing in premium brands.
3. Time restrictions for buyers
A limited-time offer is a common marketing strategy that encourages consumers to act immediately. It creates the impression that the product is limited in quantity or that the offer has an expiration date. For example, adding wording such as “ sale ends in 24 hours ” after the initial price offer is launched will result in a quick response from consumers. Emphasizing scarcity creates a similar effect. “Only three left in stock” is a good example.
Exclusivity
E-commerce business owners who have an email list of their customers can use exclusive pricing methods for select customers. The idea behind exclusive pricing is that the customer feels special because they are offered a price that is “just for you because you are one of our best customers.”
Exclusive promotions serve as a reward for loyalty or for first-time customers. This is a powerful strategy for building trust and long-term relationships with customers.
Researchers have found that exclusive pricing works best for brands that offer a unique product. Unique product seekers respond more positively to exclusive pricing offers because it reflects their individuality.
Combining multiple products into one
The marketing strategy reduces the cost per product bundle, but works best for e-commerce business owners who offer related products and have a target audience that can afford to buy large quantities of the product.
For example, if you sell cosmetics, you can include several complementary items in one set. The selling price should be significantly lower than the cost of the set if all the items were purchased separately.
The psychological pricing tactic here is to show what the price would be if the items were purchased separately. For example, ” Get $99 worth of items for only $69 ” or ” Save $30 when you buy $99 worth of products .”
How to Make Psychological Pricing Work for You
Most psychological pricing strategies are based on staying competitive in the marketplace. This is especially important for e-commerce business owners who prefer to compare prices.
To maximize your profits, you need to know what your competitors are offering. The only time-effective way to do this is to use price monitoring software that provides easy access to thousands of prices of products sold online. If you want to beat your competitors, you need to know what methods they are sing, and our price monitoring and pricing automation platform can help you do that.