Have you ever seen a message that said “limited time offer!” and ended up purchasing something you never thought you even needed in the first place? 

If you answered “yes”, then that company or brand has successfully used psychological pricing to motivate your impulsive purchasing nature into a sale. 

Isn’t it incredible how the very same product applying different pricing techniques can greatly impact spending habits? 

We complied 5 of the most useful – and not the most obvious – pricing psychology tactics that you need to know to create the right perceptions with your customers and increase your sales. 

These pricing tactics are supported  by research and help you to navigate the type of price communication and perception for your product with your customers. 

Less is More

The “Less is More” concept applies both visually and audibly. 

Visually, the more symbols and digits your price tag has the pricier your consumer assumes your price to be. For example, imagine you had a product priced at $1,399.

If you present the product price as  “$1,399.00” it would be perceived as more expensive than if the same product had a price tag of “1399” written on it.

If a challenge is the price perception of your product is high or “expensive”, reducing the number of symbols or digits  can be an easy way to shift perception with your customer. 

Audibly, the more syllables the price contains the more expensive it is perceived to be. In a study by researchers at Clark University and University of Richmond, researchers found a positive correlation between number of syllables and perception of how expensive a product is perceived.

Despite being the same in length, the study found that despite 59.99 being a higher number it is perceived as less expensive. 

 

 

Time Constraints

If you have been shopping any time this past month, odds are you have seen a sign or messaging that says something along the lines of “Today Only! BIG Sale!”. 

In reality, these sales can actually occur pretty often but by creating this sense of urgency pushes you to spend money now. This taps into consumers’ pricing psychology. In this case consumers’ FOMO (fear of missing out) on an opportunity to save money and get a good deal. Equally powerful is the fear that everyone else got a better deal than you. 

An infamous example that shows how well time constraint sales worked is the day that JCPenny decided to get rid of all their sales, which played an important role in the company’s 20% sales decline. 

 

Pricing Order 

You can positively influence how your customers feel about more expensive options by placing your products in order of descending prices. 

The effect of pricing order was tested by three researchers Kwanho Suk, Lee Jiheon and Donald R. Lichtenstein, who worked with a bar and changed the order of beer prices over a span of 8 weeks to find the sequence that maximized revenue. At the end of the research, it was concluded that pricing high to low would increase sales by approximately 4% for each beer sold.

The first reason that the researchers listed as contributors to why “high to low” pricing maximizes prices is that the initial prices create an anchoring effect. By seeing the higher prices first, consumers will use those prices to compare the rest of the list to. 

The second reason was loss aversion, which is the human’s tendency to focus on losses. With pricing low to high consumers will perceive that they are “losing” the power to save money. While pricing high to low, consumers will feel like they are “losing” quality. 

 

Small Changes Can Go A Long Way

Pricing similar items at the same price can easily deter consumers from purchasing the product. 

This was demonstrated by a study done by researchers from Yale who found a 31% increase in purchases, from 46% to 77%, when identical items were given a slightly different price. In their study, they utilized two packs of gum which were both initially priced 63 cents each and then 62 cents and 64 cents. 

When the prices of gum were different, it decreased the consumers’ need to spot differences and made the purchasing thought process more simple thus leading to more sales. 

The Power of “Discounts”

Consumers look for a deal and for some, this objective drives the pricing psychology and perception. 

With the transaction utility effect, consumers are motivated by the potential of losing out on a “deal”. if the exact same product at the same price is offered to the consumer, the one with a “discount” label can have a higher willingness to pay. 

For example, if a retailer offered a chair but with two different offers. One offered the chair priced $100 dollars. For another offer, the exact same chair is also priced at $100 dollars but shows that the chair was discounted 20% from $125. In this scenario, studies have shown consumers would be more willing to purchase the second option – the chair on “discount” even if the price is the same.

This is similar to how the “timing constraints” technique works. As consumers are wary of missing out on a good deal, that is a core motivator and shapes price perception more than the number itself.

Key Takeaways On Pricing Psychology

Companies with powerful pricing strategies leverage all pricing “senses” that best connect with your customers. This includes understanding your customer’s pricing psychology. This helps to focus your customers on the unique value-adding elements of your product, but also to align price perceptions with that value.  

There are appropriate applications for each tactic. Time, place, frequency, and customer ring all should factor into how and when such tactics are used. Selective use can have an outsized impact on sales and perception. Here your strategy and research will always pay off when it comes to pricing. 

These  small changes can drastically impact your sales in the long run so consider exploring  these simple changes to your pricing playbook!

 

 

 

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