10 Psychological Pricing Strategies Proven to Increase Sales
Sales and marketing teams are constantly searching for ways to improve the appeal of their offer to their target buyer. One simple but effective way some teams contribute to this goal is through psychological pricing strategies.
Psychological pricing refers to a set of pricing decisions rooted in buyer psychology that aim to entice the buyer to make a purchase; in other words, psychological pricing takes advantage of the fact that pricing format can have subconscious effects on buyer behavior.
In this article, we’ll go over everything you need to know about psychological pricing, including what it is, how and why it works, and some specific strategies you can try with your team.
Here’s what we’ll cover:
- What Is Psychological Pricing?
- Why Psychological Pricing Is Effective
- Advantages and Disadvantages of Psychological Pricing
- 10 Psychological Pricing Strategies
- Examples of Psychological Pricing
- Psychological Pricing Best Practices
What Is Psychological Pricing?
Psychological pricing is a sales and marketing strategy that attempts to speak to a buyer’s subconscious in order to subtly influence how they make purchasing decisions.
All psychological pricing strategies speak to one of three primary buyer needs:
- The need to save money
- The need to invest in the highest quality product
- And the need to get a good deal
All buying decisions are driven by at least one of these needs, whether consciously or otherwise. Sales and marketing teams who use psychological pricing strategies can identify which need resonates most strongly with their target market and format their offer prices accordingly.
Psychological price formatting strategies are all about the buyer’s perception of the offer’s value. The goal is to subtly influence the buyer’s emotions as they navigate an otherwise logical process.Understand buyer behaviorUncover exactly what messaging is resonating with prospects in your outreach
Why Psychological Pricing Is Effective
Psychological pricing can have a surprisingly big impact on buyer behavior, especially considering how easy most of the strategies are to implement.
Part of the reason psychological pricing works so well is that human beings are very predictable. When it comes down to it, regardless of the purchase we’re making, we want to feel like we’re getting the best.
What constitutes “the best” of something will be determined by what a buyer’s particular goals are with a given purchase; if, for example, the buyer’s goal is to save money, “the best” product will be the cheapest one.
If the buyer’s goal is to buy the highest quality product, they might be attracted to the one that’s priced the highest; they may also respond well to other price formats that indicate top quality (more on that later).
It’s up to sellers to know what their target buyer considers “the best” so they can format their prices accordingly.
Fortunately for marketers and sales reps, most buyers simply don’t know what something is “supposed” to cost. The vast majority of consumers feel satisfied that they’re getting “a good deal” as long as they feel like they’ve identified the offer that best meets their primary needs.
Sales reps and marketers have figured out pricing formats that influence the brain and allow buyers to believe that they’re getting the good deal they’re looking for.
Advantages and Disadvantages of Psychological Pricing
It’s common to find companies that rely on several different psychological pricing strategies, while others use none at all and prefer not to bother. It really comes down to preference; not every strategy is right for every team, and some sales and marketing teams find that their target market isn’t influenced at all by pricing format.
There are a couple of pros and cons to psychological pricing that sales managers and marketers should consider as they consider developing their pricing strategy.
Inexpensive and Easy
Psychological pricing strategies cost nothing but the time it takes to learn the psychology behind them and update your pricing pages.
They’re easy to implement and measure, and can have a surprisingly big impact on conversion rates, given how little effort they require. It’s also really easy to layer psychological pricing tactics alongside other pricing and marketing strategies.
Better Experience for the Buyer
Some psychological pricing strategies actually simplify the buyer’s journey for the prospect. Several help them avoid complex math, for example. Psychological pricing can also help capture a buyer’s attention and help them better understand the most relevant parts of your offer.
Still, there are disadvantages to psychological pricing as well.
Can Appear Dishonest
For customers in the know, some psychological pricing strategies can feel sneaky and even manipulative. In some instances, this creates customer churn instead of loyalty.
It can also create instances of misperceived value, where the customer feels led to believe they’re buying a product of a certain caliber, but later realize that it doesn’t live up to their perceived expectations.
Even the most effective psychological pricing strategies aren’t meant to be long-term solutions for generating profit. Most have little impact on profit margin in general, and no psychological pricing strategy is enough to make up for an overall ineffective marketing approach.
10 Psychological Pricing Strategies
Fortunately, most sales or marketing teams who want to try psychological pricing will find that there are specific strategies to meet the needs of just about any market or buyer.
Here are 10 of the most common and effective psychological pricing strategies.
1. Charm Pricing
A charm pricing strategy formats prices so that they end in -.99, rather than a rounded dollar (-.00). Charm pricing relies on the assumption that buyers make purchasing decisions based primarily on the front number.
In other words, buyers are more likely to buy something that’s $2.99 than $3.00, because the “2” in front makes them feel like they’re spending less, even when the two are essentially the same price. This is also known as left-digit bias.
2. Odd/Even Pricing
The odd/even pricing psychology states that consumers looking for the cheapest deal will tend to buy products with prices that end in odd numbers, while buyers looking for the highest quality tend to prefer prices that end in even numbers.
3. Slash the MSRP
For many buyers, physically seeing the MSRP (manufacturer’s suggested retail price) slashed out with a red or otherwise bold marker, and replaced with a lower price can make them feel like they’re getting an amazing deal.
Be careful in how you advertise your prices; some retailers try to enhance the MSRP effect by marking the MSRP higher than it should be to make it seem like an even sweeter deal, but that can backfire in a hurry.
This strategy can open the door to a lot of gray area in terms of unethical advertising, so be aware of how your pricing decisions with this strategy may appear to customers. And, of course, always be honest.
4. Artificial Time Constraints
Many sales and marketing teams use psychological pricing to create or exaggerate a buyer’s sense of urgency. They advertise limited-time deals, low inventory, or other suspense-building tactics in order to urge buyers to act now and commit to a purchase.
With an innumeracy strategy, marketers position a single offer in two different ways, with one being known as more attractive to the buyer. The juxtaposition of the preferred option against the less preferred one makes them more likely to buy.
For example, nearly all buyers will choose a “buy one, get one free (BOGO)” offer over a “buy two, get 50% off” offer, even though both amount to the same cost. Innumeracy plays on the buyer’s irrational preference to get something for free.
6. Price Appearance
There are many minor things that marketing and sales teams can do to influence how a customer feels about a product’s price.
The way a price looks, for example, has a big impact on how a buyer perceives it. Shorter numbers feel less expensive than longer ones (i.e., $12 feels more affordable than $12.00). And, for that matter, removing the dollar sign altogether (12) goes even further in helping the cost feel more diminutive. As a bonus, the lack of special characters (dollar sign and decimal point) also helps elevate the perceived quality of the offer.
7. Flat-Rate Bias
Most buyers, if given a choice, prefer flat-rate options versus pay-per ones.
Flat-rate prices feel inherently more stable, even if simple math might indicate a pay-per-option would be cheaper. Most people would prefer to overpay for the “just in case” scenario and (subconsciously) the simplicity of a flat rate than calculate how much they will likely use.
That being said, this psychological pricing strategy is highly dependent on your buyer persona, so make sure you do your research.
8. The Decoy Effect
The decoy effect pricing strategy positions one desired option among two seemingly unreasonable ones.
In the popcorn example above, the movie theater wants to sell large popcorn, and the medium popcorn is the decoy.
To the buyer, it makes sense that the large costs twice as much as the small. But the large is a much better deal relative to the medium, so buyers are more likely to go for it. The medium popcorn helps position the large popcorn as a great deal.
9. Center Stage
In a center stage pricing strategy, marketers position the desired product in the middle of two lesser attractive ones. This works in two ways: not only is our eye naturally drawn to the middle, but it also gets natural priority in our brain.
Most marketers also add to the center stage effect by making the middle option the most aesthetically pleasing, as shown in the example above.
Bracketing is another example of pushing buyers toward a middle-ground offer, and plays nicely with the center-stage strategy.
This strategy positions the desired option in the middle, with two extremes on either end (usually an option that seems cheap enough to denote low quality, and one that’s cost-prohibitive). Bracketing plays on the human aversion to extremes and can help guide buyers to their “perfect fit.”
Tip: Looking to further understand the psychology behind buyer behaviors? Grab our free ebook below.Psychology Principles + 13 Power Words for Winning SalesData-backed psychological principles, nonverbal cues, and persuasive phrases to win more deals.
Examples of Psychological Pricing
Psychological pricing strategies are extremely common; there are examples of them all around us.
Many E-commerce websites highlight sale prices by showing the MSRP crossed out, so buyers can tangibly compare how much they’re saving by buying today.
In the advertisement below showing different blender packages, the retailer introduces a decoy (the $125 offer) to make the $149 offer seem like a better deal.
Apple, one of the most well-known brands in the world, commonly uses charm pricing with their products to take advantage of left-digit bias.
The next time you shop for something new, note the way the sales and marketing teams have formatted the product’s pricing. Chances are, they used at least one psychological pricing tactic to make the cost seem more appealing to you and other buyers.
Psychological Pricing Best Practices
One of the best things about psychological pricing is that there are enough proven strategies available to meet the needs of just about any sales or marketing team. Here are some best practices to follow regardless of which strategy you implement.
Price With Purpose
To avoid your customers feeling like your pricing is manipulative, make sure you choose your psychological pricing strategies intentionally and according to the unique needs and preferences of your ideal customer profile and buyer personas.
There are many ways to find success with psychological pricing, but that doesn’t mean that you should just try different things until you see what works. Choose your strategies with purpose, and track their results to ensure you’re speaking to your target buyer’s needs.
Don’t Overdo It
With so many psychological pricing strategies available to try, it can be hard to know where to start. Always err on the side of starting slowly and adding more as time goes on. You won’t know how your strategies impact your target buyer until you collect and analyze several sales cycles’ worth of data, so be patient with implementation. If you add too much at once, it will be hard to untangle what’s working and what’s not.
Psychological pricing is one aspect of sales that requires continuous monitoring; salespeople should also be prepared to update, tweak, or completely change things as needed.
Plan to iterate on your pricing strategies until you identify how to format your prices in a way that speaks to your buyer’s “sweet spot.”
Do you use psychological pricing strategies? Which ones? How have they improved your conversion rates?
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