The Core Principle Behind Psychological Pricing Revealed
In this busy market system we are currently in today, within lies many complicated variations of business strategies and planning, one pricing technique widely used is known as psychological pricing, which is by exploiting human psychology in pricing to yield higher sales and conversions.
In fact, almost all consumers fall for psychological pricing, and all these strategies utilize the exact same core principle which I'm about to reveal... is price perception, also known as perception of value or customer value perception.
The meaning behind price perception isn't really that complicated, price perception is literally what it is said to mean, the perception of prices. You might wonder, how has this perception got to do with marketing and how can it help generate more profits? Explained as follows:
Example #1 - Odd Pricing
Ever been around in supermarkets? Yes. And notice how prices are set? What do you mean? $29.99, $4.95, $7.97...etc Sounds familiar? This common ending-in-9 pricing trait it used almost everywhere and its official term is called odd pricing, or odd-even pricing.
Odd pricing is a technique that focuses on using uneven endings like 9.99 rather than a complete 10 to create the perception of 9.99 being a lot lower than 10, although its actual numerical difference is only by 0.01, its humanly imaged perception is significantly greater.
This strategy psychologically “makes” 9.99 appear more cheaper than 10, and so this is what makes odd prices attractive to consumers who have a lower shopping budget, this is what price perception is referring to by its name.
Example #2 - Prestige Pricing
On the opposite side, not only does making products appear cheaper help increase sales, raising a price actually also help increase sales, weird but true! The reversed version of odd pricing is termed prestige pricing, its goal is exactly the opposite of odd pricing.
Prestige pricing aims to make its price appear expensive such as by pricing something at $5000 rather than $4750, this is effective in raising sales only if it were high-end products being sold such as jewelry, handbags, perfumes and all those luxury based items.
The above two pricing strategies are simply examples of what a psychological pricing strategy would base on - the core principle, which is price perception, or perception of value as explained above in the introduction.
If the core principle is utilized properly, then a pricing tactic as such will become effective against the majority of the consumers in the world, as all consumers are human beings in the world and will be sensitive to psychology.
On the contrary...
We often look at things in the positive side, why not consider reviewing the negative points? Check out the advantages and disadvantages of psychological pricing.
Remember the goal of this principle is to create a perception in the minds of the target audience.
By making them believe something which is slightly different than its true self; which does not matter but as long as it's beneficial to your overall pricing stratagem is great.