Tags – Psychological Pricing
Have you ever overspent while shopping?
I am sure most of us have, especially after visiting the local supermarket.
Don’t be too hard on yourself: you have simply succumbed to some basic pricing strategies that encourage unintended spending.
Everything from the design of the stores to how the pricing is displayed plays an important role in how people spend money. But that is just the beginning of how psychological pricing works.
Psychological pricing is the practice of setting prices in such a manner that encourages people to spend more than they would normally have.
The techniques behind psychological pricing come in various forms. Here are 4 simple instances:
1. Time Constraints
Probably the most common tactic used, especially in retail, a limited time offer can trigger a psychological want to have something. Doing so is a simple “fear of missing out” technique.
This can be anything from a limited time sale to striking off part of the price on specific times and days.
In the UK, such is the impact of setting time constraints that stores can switch their traffic instantly. For example, most supermarkets have specific times when they strike down prices to push items close to expiry or best before dates.
In most cases, the aim isn’t just to sell those items, but doing it at a specific time also triggers added footfall, which then leads to the selling of other items in the store.
2. Charm Pricing
Have you ever noticed how many items have a 9 in their pricing?
With how often we see prices ending in a 9, many of us question if it is still effective.
The simple answer is: yes. According to research from MIT, ending your prices on a 9 is a proven technique to increase your sales.
In all fairness, simply not making your price a whole number is a sure way to increase your sales.
Same goes for keeping a small distance from the next significant number, e.g. choosing 950 instead of 1,000.
However, if you are selling a high class item, end your price on a 0. If you want examples of this in action, check any high end clothing brand. Chances are that a majority of them are applying this strategy.
This is where options come into play; options that seem equal on paper but are not really.
For example, which is better: “50% off” or “buy 1 get 1 free”?
In reality, the 2 options here are exactly the same. However, that is not how we perceive the price. More people prefer “buy 1 get 1 free”.
This is the innumeracy phenomenon: when people cannot differentiate fundamental math principles in everyday life.
Other ways innumeracy is applied includes:
- Discounting an item twice instead of discounting once in the same amount. For instance, if an item is discounted 10% once and then 20% further, a consumer will prefer this over a single 30% off.
- Pumping percentages instead of the actual value. For example, if an item has been reduced from 50 to 25 quid, you are better off putting “50% off” instead of simply putting the new price.
No matter what tactic you pick, you need to work towards creating a sense of urgency.
If the above examples do not apply to you, you can consider:
- Using odd numbers in your pricing. Yes, research shows that odd numbers are preferred over even numbers.
- Anchor pricing: using a smaller price to draw in a customer, before selling them more items.
Or, if you want to continually raise your prices in a systematic manner, please check our video below:
In the meantime, please check our digital marketing services.
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