Strategies of psychological pricing to increase profit

Strategies of psychological pricing to increase profit

64% of Russians consider price to be the most important factor influencing the purchase decision. And here comes the dilemma: if you price your products too high, you risk losing customers, and if you price too low, you risk losing profits. What’s the point of having a great product if you can’t convince customers to buy it? Psychological pricing strategies will be needed here.

There are a wide variety of psychological pricing strategies that companies can use to entice their target audience to purchase. Implementing these strategies can help increase conversions as well as increase profits in the long run.

What is psychological pricing?

Psychological pricing works on the principle of how the human mind perceives the prices of goods. This is an approach that triggers automatic beliefs by seeing product prices. Many sellers have been using the psychological pricing strategy for a long time. It ensures a significant increase in sales and an increase in profit.

5 strategies of psychological pricing

For many business owners, understanding and using a psychological pricing strategy helps improve sales and increase profits. Here are 5 effective psychological pricing strategies you can implement to achieve significant results:

#1: The magic of the number “9”

It may seem like a simple number, but “9” has a lot of meaning when it comes to pricing. Rounding the price to 99 is a powerful pricing tactic used by businesses that has resulted in increased sales and revenue.

The concept works on the basis of the left digit effect, in which the human brain focuses only on the first digit of the price and rounds it down, not up. The strategy works because psychologically rounding up to 99 makes the price lower.

Back in the early 2000s, a study was conducted in which experts tried to find out how a price ending in 9 affects retail sales. It turned out that such prices are even more effective than lower prices for a similar product.

For example, a product costing 999 rubles will seem cheaper to buyers than 1000 rubles, despite the fact that the difference is only 1 ruble. Consumers tend to only see the first digit, i.e. “9” and will perceive it as more pocket-friendly.

Impressively, even when comparing the prices of 350 rubles and 399, sales with a price ending in “9” were higher than sales at a lower price by an average of 24%.

Chain stores and sellers can use this strategy to sell more products, especially when people are looking for good discounts.

#2: The right way to display the price

Pricing strategy depends on how our brain perceives numbers or objects. A number of studies have shown that buyers tend to perceive a price as lower if it is indicated in smaller print.

Also, prices appear smaller to consumers if they contain fewer characters. This was the conclusion reached by experts when consumers were shown several options for marking prices:

  • 2,399.00 rubles

  • 2,399 rubles

  • 2399 rubles

The first two options seemed higher to consumers than the third price. The effect is due to the fact that when the phonetic length of the price is minimized, the human brain tends to perceive it as lower. It occurs even when the price is not spoken out loud.

#3: The anchor effect or comparative pricing advantage

Buyers always compare prices of similar products before making a purchase decision. You can use this psychology when pricing your products. This is also known as comparative pricing. For example, to sell a smartphone for 30 thousand rubles, it is better to put it next to a smartphone for 120 thousand. And this is where cognitive bias comes into play. A 30k smartphone looks like a good buy next to a more expensive product, while it feels like a premium product when placed next to an 8k phone.

Thus, placing premium products and services next to standard offerings allows you to create a clearer picture of the value of potential customers.

#4: Complex pricing

Another powerful and effective strategy you can use is bundled pricing. It works on the concept that when you buy a camera, you can also be interested in a cleaning kit by paying extra money. Considering human psychology, complex pricing is a fantastic way to increase sales. The pricing strategy works well because buying a bundle costs less for the buyer, and it increases the value of the purchased original product. Also, buying items together seems easier than buying them separately.

#5: Demonstrate good product quality at a higher price

It is common knowledge that consumers perceive a product of higher quality if the price is higher. People are happy to buy goods at a high price because they get the impression that they have bought a good quality product.

Using this human psychology is a great option when you are trying to present your product as valuable. The strategy is known as prestige pricing, that is, pricing high-end products that demonstrate excellent quality. This works because consumers expect high value from their purchases, and an expensive product can evoke a sense of “prestige.”

Therefore, lowering prices may not always attract quality-oriented customers because they often associate a lower price with lower quality.

Conclusion

There are quite a few psychological pricing strategies out there, but it’s important to understand what works for you because understanding consumer buying psychology and applying it to the price of your products can significantly increase conversion. Meanwhile, one should not forget that in the conditions of dynamic pricing, it is important not only to understand purchasing psychology, but also to have up-to-date information about the pricing policy of competitors.

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