The techniques that retail stores use can also be very effective when applied to pricing in other industries. Psychological pricing is the business practices of setting prices lower than a whole number. The idea behind psychological pricing is that customers will read the slightly lowered price and treat it lower than the price actually is. Psychological pricing techniques come in many forms. Here are four examples of psychological pricing strategies:.
Snarkiness aside, there always seems to be this urgency around these sales, which ironically happen every weekend in some fashion. Look at how well JCPenny performed when they took them away. Stores place these restrictions on their sales because they act as catalysts for consumers to spend.
Consumers are afraid of missing out on such an obvious deal, so they make the purchase in order to avoid this potential feeling of regret or missing out.
There's great power in creating artificial demand. Essentially, go back to your high school dating days and play hard to get. Be careful though, don't go too deep onto the discount pricing wagon.
You want to make sure this lever reinforces, not deteriorates, your brand. Studies done by researchers at MIT and the University of Chicago have proven that prices ending in 9 create increased customer demand for products.
Feel free to take advantage of this fact in your pricing. The prevalence of charm pricing has created the opposite effect as well. Psychological pricing tactics are most effective when used at the appropriate time and place. When choosing which tactics to implement, consider your product or service, business model and goals — as well as the subscription pricing model and pricing strategy previously chosen.
The lesson here is that prices are hard to get right and hard to keep right. So, be open to regularly tweaking and revising your use of psychological pricing tactics — and pricing as a whole. Tapping into those subconscious behaviors, patterns and biases can be an unexpectedly effective way for companies to attract and retain customers. Stay tuned for our final piece in the subscription pricing series, on pricing methods. In short: Psychological pricing, a subset of pricing strategies, is commonly used to impact customer behavior.
Inexpensive and easy to implement, these tactics can be used in addition to pricing strategies to boost their effectiveness. Watch the video. From Our Sister Sites. Speak with an Industry Expert. Subscription Pricing Model. Complementary Psychological Pricing Tactic.
Odd-Even, Charm. Buying two of the same items at half off is the same as paying full price for one item and getting another free. A study conducted at the University of Minnesota Carlson School of Management found that consumers are more likely to buy something if they get something else in return.
In other words, customers would rather receive something free instead of paying for another item at a discount, even if it all means the same at the end of the day. This psychological pricing trick plays off of the common inability to understand discount percentages, also known as innumeracy. Retailers, in turn, have started marketing their promotions with BOGO, boosting conversion rates and sales.
Psychological pricing can and does work. The goal of this tactic is to provoke an emotional response, whether excitement low price , fulfillment of a need or good value or intrigue ideal price. While no one wants to admit that psychological pricing strategies are designed to manipulate, they most definitely do.
It just all depends on who or what your end goal is. This post was originally published in September and has since been updated and refreshed for readability and accuracy. Matt is the Director of Marketing at Wiser Solutions, a retail analytics provider with an emphasis on data quality, data accuracy, and holistic in-store and online solutions. Don't miss out on our latest blog posts, whitepapers and infographics. Strategy No. They even employ the Odd-Even pricing strategy addressed above.
Your Psychological Pricing Goals Psychological pricing can and does work. Matt Ellsworth Matt is the Director of Marketing at Wiser Solutions, a retail analytics provider with an emphasis on data quality, data accuracy, and holistic in-store and online solutions.
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