Psychological pricing is one of the marketing strategies almost all brands implement to increase their sales. You must have encountered numerous examples of psychological pricing strategies but didn't realize them because you may not know what psychological pricing is.
What is psychological pricing? It is a marketing strategy where the products or services are priced in a way that attracts customers and convinces them to make a purchase. Psychological pricing uses the power of human psychology.
Psychological pricing strategies make the decision-making process easier for customers. You can use various techniques or stick to the one that's proven to work every time. This ultimate guide to psychological pricing will teach you everything from the types of psychological pricing to how and where to implement them.
Pros and Cons of Psychological Pricing
Psychological pricing strategies can be highly beneficial in some cases, and sometimes they can harm your business more than benefit it. We've compiled a list of psychological pricing pros and cons so you can figure out where to use them and where not to depend on your business's situation and target audience.
Does Psychological Pricing Work?
Psychological pricing works for most people, but it doesn't guarantee to work for everyone. Psychological pricing uses people's impulsive nature to make purchases and provokes emotions (excitement for the best-value price, fear of missing out on discounts, etc.).
Pros of Psychological Pricing
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Here's how psychological pricing strategies benefit your business.
1. Gets People's Attention to Desired Products
Tweaking down prices of items you want to sell quicker than others can drive consumers' attention to them. For instance, you run a grocery store with some products with a short expiry date. You can implement psychological pricing strategies on those products and convince people to buy them before they expire.
2. Gets You Knowledge of Your Target Market
To successfully implement psychological pricing strategies successfully, you must conduct a lot of market research. This analysis will tell you what techniques will work on your target and what won't. The benefits of that market research don't stop there. When you have an idea about your target market, you can implement that knowledge in your other marketing campaigns. And well-researched marketing campaigns perform better than the ones that are not or very little-researched.
3. Avoid Fraud
Calculating odd and decimal numbers quickly isn't easy. Therefore, psychological pricing can reduce the risk of fraud, specifically at the cash counters.
Cons of Psychological Pricing
Like every other thing in this world, psychological pricing comes with drawbacks too.
1. Short-term Solution
You need to have long-term plans for your business sales to take off and stay up there for a long time. But because psychological pricing is a short-term strategy, it's not guaranteed whether or not it can level up your brand. Psychological pricing strategies only increase sales for a short time, and that too without ensuring a profit.
2. Time-consuming and Difficult
You need to conduct a lot of market research for psychological pricing. Research-intensive tasks require a lot of dedication and time. And even after that, the profit is not guaranteed.
Moreover, if you get the strategies wrong, psychological pricing can harm your business rather than benefit it.
3. Deceitful
Some psychological pricing strategies may require you to lie to your customers. Such as artificial time constraints. This refers to telling your customers that your sale or discounts will only last for a specific period when the owner knows they will last longer than said. It encourages the consumers to quickly make the purchase the fear of missing out on a product or a discount.
Types of Psychological Pricing
Read the types of psychological pricing below, and you will recognize how almost every brand you come across uses this marketing strategy.
1. Odd-even and Charm Pricing
Odd-even pricing refer to determining the cost of your product that ends at an odd number. For instance, $80 goes down to $79. This will trick the human brain into seeing the cost of the product as less than $80 when there's only one dollar difference.
Charm pricing refers to taking one cent out of the whole number price. For example, pricing a product at $5.99 instead of $6. This tricks the brain into focusing on the number 5, not the 99 cents. Dr. chai's products' prices are a great example of charm pricing.
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2. Price Appearance
How your products or service's prices appear affects sales significantly. The longer the price appears, the higher it looks. Therefore, you need to cut down on the cents. For instance, you must have seen many restaurants pricing their meals at $12 instead of $12.00.
Further, removing the dollar sign can help too. Dollar signs can also provoke the pain of paying. We all know that pain when spending your hard-earned money. Therefore, remove the dollar sign and cents at once, and your prices will look like this: 12. It Looks less than $12.00, right?
3. Value-based Pricing
Value-based pricing lets you control your target audience's perception of your brand. If you want your consumers to consider your business a luxury brand, you will set luxury prices. And if you want your target audience to think of you as an affordable place to shop, you will be pricing your products accordingly. For instance, no one would expect to see a Chanel dress priced at $50. But you would expect to find a $50 dress at Forever 21. That's because these brands have formed a reputation amongst the crowd.
Value-based pricing requires you to determine your company goals and do in-depth research. You need to know what kind of people you are targeting. If you're going for a luxury brand like Fendi or Versace, your target audience will be rich people who are comfortable spending thousands of dollars on their apparel. And an affordable brand will target low-income people looking for a good quality product without spending a massive chunk of their earnings.
4. Innumeracy
Innumeracy refers to offering deals with the same math but different appearance. For example, you go to a grocery store and see different values on the bread of different brands. One deal says, "buy one and get one free," and the other says, "buy two packs of bread and get a 50% discount on them." The maths is the same. In both deals, you're getting two packets of bread for the price of one. But for many people "buy one get one free" sale is profitable because it has the word "free" in it.
5. Comparative Pricing
This psychological pricing tip is more toward the placement of the product rather than determining its price. Here, you place low-priced products with high-priced products to increase the sale of high-priced products. It doesn't make sense, right? Why would someone buy something for a higher price when they can get it cheaply? Well, this is how the human brain works.
Here's an example. In a grocery store, there are two packs of plain oats of different brands. One box costs $25, and the other retail at $37. Many people would go for the one that's more expensive because they think it will be of superior quality. Sometimes there's a difference in quality, but other times there isn't.
This tactic is also implemented in e-commerce stores.
Get Your Products in Your Online Store
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Once you're done determining your products' prices, you need a place to present them. Your physical store is one place to showcase and sell your products. The online store can be the second place. An online store will expose your business to a broader range of audiences, increasing your chances of sales conversion. If you haven't built your online store yet, Strikingly website builder can significantly help.
Strikingly offers more than 200 free ready-to-use website templates, which you can customize in the intuitive website editor and get your site ready to be published within a few minutes. Furthermore, websites created using Strikingly are automatically mobile-responsive. You won't have to take extra steps. Mobile-responsive websites are loved by Google, which increases the chances of your store ranking high.
Creating your online store with Strikingly is a piece of cake. You must go into the site editor and add it as a section. You will see the "Add section" button in the left menu.
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Let's look at the online store features Strikingly gives its users:
1. Product filters and categorization.
2. Coupons for returning customers.
3. Ability to receive payments from multiple gateways (Google pay, credit cards, Klarna, etc.).
4. Custom checkout forms.
5. Ability to display product reviews.
6. Online store analytics to see consumers' reactions to your products or services.
Lastly, remember that all the tips may not work for all kinds of businesses because of the difference between the target market and consumer thinking. Ensure you've researched your audience well before implementing these strategies. Once you're all set, launch your business online with the Strikingly store and get ready to extend your customer base.
