As business owners, costs and profits are the first things that come to mind when we think about pricing. But did you know that pricing is more than just numbers?
In this article, we’ll talk about psychological pricing and how you can use these tactics to maximize sales for your business.
What is psychological pricing?
Psychological pricing is a pricing strategy commonly used by businesses to sway consumers’ buying behavior. It uses the price of your products to influence your customer’s decisions by meeting their psychological needs.
Some examples of consumers’ needs include saving more, getting a premium quality item, or not missing out on a “good deal”. When implemented effectively, psychological pricing can persuade consumers to buy your products and maximize sales for your business.
Why do businesses use psychological pricing?
More often than not, consumers make decisions based on their emotions. They want to know that they’re getting the best of what they’re purchasing, whether in terms of quality or a “better deal”.
Pricing is more than just putting a price tag on your products. It’s having the right pricing and presenting it in a way that appeals to your target market—that’s why most prices end with 9s and 5s. Based on a study, it was found that these pricings accounted for 90% of the 840 prices that were analyzed.
A cautionary note about psychological pricing
Finding the sweet spot for your pricing strategy is going to bring your business to the next level. That said, there are various factors that have a hand in influencing the sales you’re making.
The quality of your products, your branding strategy, and your marketing plans all work together to build your business. Psychological pricing alone might not bring miraculous results if your products are perhaps lacking in good reviews or needed exposure.
How to use psychological pricing in your small business
Now that we understand the broad concepts of psychological pricing, let's dive into some practical tactics you can use to grow your business!
Charm pricing is a well-known pricing tactic used by businesses. The strategy removes one cent from a rounded price of an item to create an impression that a product costs less.
A product that costs $19.99 seems to cost significantly lesser than $20. That’s why prices of goods and services tend to end at 99 cents. By deducting one cent, it reduces the numerical digit on the left side.
Left digit bias
This brings us to the next point—left digit bias. Consumers tend to favor the left digit more because culturally, we are attuned to reading from left to right.
Charm pricing activates consumers’ left digit bias but there are other tactics you can use to enhance this bias even more. One common practice is to enlarge left digits and reduce the size of right digits.
Don’t have a physical store? You can still implement this strategy on your social media platforms. Whether you’re launching a new product or promoting existing items, use left digit bias in your creatives to make your products more enticing to consumers.
Flat rate pricing
Flat rates gives an impression of safety and trustworthiness. Consumers don’t feel like they need to pay extra for shipping, taxes or any hidden fees. Here’s how you can implement this tactic:
Suppose you’re selling a product that costs $15. Instead of charging them an extra $3 for shipping at checkout, price your product at $18 and offer “free shipping” for selected items. Consumers like flat rate pricing, even if they cost more.
Want to clear stagnating items by slashing prices? Steep discounts are great at pushing sales but if you want to maximize your revenue, position discounted items next to regular item products.
Placing similar items with different prices next to each other makes consumers to be more aware of the savings they get to enjoy. Here’s how you can implement this strategy in your online store:
1. Identify similar products that fall in the same category
2. Choose the variant that you’d like to offer a discount
3. Position these items next to each other on your online store
Comparative pricing works best if you have similar products that have 2 different price points. But what if you have similar products that fall in a wider price range?
In cases like this, you can make use of the centre-stage effect. When consumers are given a range of different prices, they don’t normally go for the cheapest. Instead, they go for a price that’s somewhere in the middle.
A study has found that people perceive products in the middle as the most popular and a safer choice. This pricing strategy works especially well for products that consumers don’t tend to buy so often and aren’t easily replaceable.
Additionally, research has also found that this effect is more prominent when we’re choosing to buy a product for someone else. Depending on your niche, you might want to use this pricing strategy to grow your business!
Make every transaction seamless with your own website
Pricing isn’t just putting a price tag to your products. It’s an experience. That’s why it’s so important to make every transaction a seamless, fuss free experience for your customers.
Support your marketing plan and pricing strategy with your very own website. With Cococart, setting up a website takes no more than a few minutes. Sign up for an account and start making online sales right away.