Here is a brief on what the article is going to be about: “This article will discuss how it can be applied, as well as go through different types”.
Pricing psychology isn’t just about persuading customers to buy our products or services. It also provides insight into how we can better manage our own mental capacity and judgements.
This includes learning how we can use psychological pricing strategies for ourselves as consumers, but also as marketers
By applying this knowledge to your own business, you can improve customer satisfaction, and increase profit margins.
A device or technique that ensures production of a good unit every time is a is a good example of the term.
Microeconomics is the study of the behaviour of individuals, households and firms in making decisions and their related relationships to each other and their physical environment.
The study is based on the motivations and actions of individuals, both consumers and businesses that provide goods, services, income and employment. Microeconomics examines markets through demand and supply as well as costs to ensure a business’s survival.
Demand refers to the entire amount of money spent on a product or service within a given time period.
This includes how many things are sold at what price (revenue), as well as how much and how often (frequency). Demand is usually measured on a graph with quantity or price on other axes.
1. What Is Pricing Psychology?
First let’s define what we mean by “psychological pricing.” The term is relatively new, but the concept isn’t.
As the first studies on how the human mind processes numbers emerged, marketers quickly began to understand that more than just price (the cost of a good or service) affects a customer’s purchasing decision.
It was discovered that certain numbers and mathematical ratios are perceived differently from others by our conscious and unconscious minds.
Think about it—have you ever felt curious about what something costs, only to be persuaded by its price?
Do you hesitate when buying something for $29.99, but not $30? If so, your mind is working the same way as millions of others’ out there.
That is what we call the psychological pricing strategy. Price plays a dominant role in the final decision, so it makes sense for marketers to highlight lower prices instead of higher ones.
2. Psychological Pricing Strategy Examples
Psychological pricing strategies are used by many industries and businesses, but here is a quick overview of how some businesses have been using them successfully:
Businesses often use psychological pricing to create a sense of urgency that drives customers to buy now, instead of later.
This can be done by adding words like “limited time only” or “while supplies last,” indicating that the product will not be available at some point in the future.
3. The Psychology of Product Pricing
But how does the mind actually process pricing information?
Well, it all starts with what we know about the three factors that are part of value creation—supply, demand, and costs.
To understand how each affects the other and ultimately the end result, you need to learn about “psychological pricing” strategies. Psychological pricing strategies are used when companies want to increase sales.
They work by understanding some characteristics of people that can help them determine what type of price will be more effective in selling a product or service.
4. Psychological Pricing Strategies
Psychological pricing strategies are used by many businesses because they work. For example, as humans we naturally associate certain numbers with other things: $40 can be viewed as a smaller amount than $100, $10 is small but $500 is big.
In addition to the number itself, we can associate round numbers (such as $30) with higher quality and bigger spending.
These two characteristics are used in psychological pricing strategies by businesses to help them sell more goods or services. Here are some of the most common psychological pricing strategies:
5. Psychological Pricing Strategies Worksheet
1. One way to get a psychological pricing strategy is to start with the price of your product and add a round number to it.
For example, if you want to sell a $100 stereo system, you could sell it for $130. A $5 difference may seem small, but the effects can be great when you are selling large quantities.
However, adding a higher number might not be the best choice because then people will associate that item with high-end prices. For example:
2. Another psychological pricing strategy is simply raising or lowering the price of what you are trying to sell by one dollar amount ($9 instead of $8, etc.).
This is a very common strategy that allows you to change the perception of what a good or service is worth without having to make major changes in your pricing strategy.
3. Isolating the price can also work well with psychological pricing strategies. If customers have to look at only one number, they won’t have time to put that number in the perspective of their total spending power.
For example, if you sell your product for $100, but add “only” $9 shipping and handling, your customer will be less likely to think about what they are actually spending.