Have you ever gone shopping and realized after you left the store that you had spent more money than you had planned? You might have fallen victim to psychological pricing traps; it\u2019s really simple to do. Stores are intentionally designed to entice you to spend more money than you intended through a variety of pricing techniques. Applying the strategies used by retail businesses to pricing in other industries can be quite successful. Let\u2019s examine four of the most common psychological pricing example tactics in more detail so that you may apply them to boost sales and, perhaps, prevent future mall overspending.<\/p>\n\n\n\n
The term \u201cpsychological pricing\u201d refers to the commercial practice of putting prices below a whole number. Reducing the leftmost digit is done in the hopes that customers will view the marginally reduced price as being significantly lower. When a $3.99 item is presented to the customer as 3 dollars instead of 4 dollars, treating $3.99 as a significantly lower price than $4.00, this is an example of psychological pricing.<\/p>\n\n\n\n
This is an explanation of psychological pricing, often known as charm pricing. Additionally, there are psychological pricing techniques that aim to persuade clients to buy more items or pay a higher price.<\/p>\n\n\n\n
Many different psychological pricing strategies exist. Four instances of psychological pricing are shown below, each with benefits and drawbacks:<\/p>\n\n\n\n
We can practically promise that if you visited any retail location in the past several months, you saw a sign advertising a \u201cone-day only sale\u201d or everything being \u201c50% off!\u201d These “short-term\u2019 deals, which can take place every weekend, always appear to be accompanied by a sense of urgency.<\/p>\n\n\n\n
Sales will always exist; that is the secret. If you don\u2019t trust us, simply take a look at how JCPenney did after they removed them. If you consistently utilize this method, your sales won\u2019t have as big of an impact, and your products\u2019 perceived prices will be lower, which is a psychological pricing disadvantage.<\/p>\n\n\n\n
Charm pricing, also known as psychological pricing, is the formal (read: pretentious) name for all those nines you see at the end of prices. Researchers at MIT and the University of Chicago have conducted studies that demonstrate how prices with a nine enhance consumer demand for the goods they sell.<\/p>\n\n\n\n
We read from left to right, which causes this psychological phenomenon. When we see a product with a price of $1.99, we focus on the number 1 and assume it is less than $2. In essence, a price that ends in nine persuades them that you are providing a terrific deal. Please feel free to use this pricing theory; if your price is $100, try making it $99 to see if it affects sales.<\/p>\n\n\n\n
Which do you believe to be the better offer? What about \u201c50% off any two items\u201d or \u201cBuy one, get one free\u201d? Even though the two options are identical (buying two items at a 50% discount is the same as paying full price for one and receiving the second free), the majority of people would prefer the first option, according to a study conducted by researchers at the University of Minnesota under the direction of Akshay Rao.<\/p>\n\n\n\n
Consumers who are innumerate are unable to recognize or comprehend basic mathematical concepts as they relate to daily life. (You\u2019re being haunted by memories of your high school math classes right now.) Other instances of innumeracy in pricing include percentage pumping, double discounting, and coupon design.<\/p>\n\n\n\n
The way you set your prices can significantly affect how customers view the value of your goods. The next time you eat at a pricey restaurant, pay attention to how they present their prices. The typeface will probably be smaller, and the numbers won\u2019t have extra zeros after them, so \u201c19\u201d rather than \u201c$19.00\u201d would be an example.<\/p>\n\n\n\n
The benefits of this kind of design are numerous. Even when the numerical value of a price is the same, consumers believe that longer prices are more expensive than shorter ones. This is so because longer prices take longer to read subconsciously.<\/p>\n\n\n\n
The fact that consumers don\u2019t always know what something should cost is exploited by psychological pricing. The two most common ways we can tell if something is a good deal are to get it for less than it would normally cost or to compare it to similar items in the same category.<\/p>\n\n\n\n
Whether or not you are aware of it, you have undoubtedly encountered psychological pricing strategies. Here are some examples of some of the tactics we just went over.<\/p>\n\n\n\n
The best sales and promotions, especially those for Christmas, usually occur after a holiday. Look at this advertisement that was placed on a shopping website. To start, the advertisement is red. You literally cannot miss it, especially with the word \u201cSALE\u201d glaring at you in all caps.<\/p>\n\n\n\n
Here, this company is using a variety of tactics, particularly in numeracy. This one advertisement has a staggering number of figures and equations. Without giving it much thought, my basic conclusion is that there are no offers available.<\/p>\n\n\n\n
This company is betting that people won\u2019t do the arithmetic and analyze how good those percentages actually are by putting all these figures out there. Another example of double discounting is this. Customers can use a coupon to earn an additional discount (plus a discount of 20\u201350%). The majority of customers will mistakenly think that\u2019s one big reduction when, in fact, the additional percentage is deducted from the already-reduced price.<\/p>\n\n\n\n
This end-of-year clearance discount advertisement likewise makes extensive use of psychological pricing. This advertisement contains a number that particularly strikes me: \u201c$89.\u201d One of the best examples of charm pricing is this particular price. Given that \u201c90\u201d is almost equal to \u201c89,\u201d the advertised price of $89 appears to be much less expensive.<\/p>\n\n\n\n
Then there is this \u201cexclusive deal\u201d that takes advantage of time restrictions. There is a banner at the top of the page with a stopwatch showing how much time is left to get the offered deal. It says, \u201cOffer ends in Xhrs Ymin Zsec.\u201d The ticking timepiece could make buyers anxious. They can actually feel the clock ticking away, which motivates them to make a purchase immediately.<\/p>\n\n\n\n