As an ecommerce shop owner, you know nothing’s more relevant to your bottom line than pricing. But where do you begin? There’s so much to consider, from your target audience’s expectations to manufacturing costs, shipping expenses, and, of course, your competitors.
In order to get the best out of your sales strategy, you have to make sure the price is always right. And getting it right has a lot more to do with human psychology than you may realize.
Let’s dig a bit deeper.
Psychological pricing is the practice of positioning prices so that consumers perceive an offer as favorable. But in order to understand how psychological pricing works, we must first take a look at how our brains process price information.
Why $9.99 Is Always So Tempting – The Psychology Behind Pricing
You’ve likely seen one of those famous infomercials for made-for-TV products. Instead of pitching their offer for $40 (plus shipping and handling, of course), they excitedly announce you can get your own product for just four easy payments of $9.99.
And it works. These products tend to rake in millions, and people are all-too-eager to hand over money for something they’ve only seen once in their lives. Why?
People see something slightly under a whole number as a good deal. So, $9.99 is a lot more appealing to someone than $10, even though there’s barely any difference.
Our brains play such a large role in consumer behavior that there’s an entire field devoted to studying it — neuromarketing. One of the most noteworthy studies in the industry was conducted in 2008. Researchers provided 20 participants with wine samples. Aside from the price, they were given no additional information about their beverages. They were asked to taste each wine and rate its pleasantness.
All of the participants rated the wine with a higher price tag as better tasting — unaware that out of the 5 samples, only three wines were really present. Wine 1 was actually used twice, once at $90 and again at $10.
So, we know that people tend to develop expectations for quality based on price. And their expectations can directly influence their willingness to pay (WTP) as well. If they believe something is great quality, they’ll pay far above average. And in many cases, even far above what something is really worth.
That said, let’s take a closer look at 30 psychological pricing strategies proven to work.
1. Charm Pricing
Charm pricing is exactly what we just talked about — slashing one cent from a price to make it seem like a far better deal to the brain. A $50 shirt suddenly becomes much more appealing to consumers when it’s only $49.99.
Granted, this strategy likely won’t be as effective if you’re selling extremely expensive goods, but it’s still a classic psychological pricing strategy to know and test in your store.
2. Odd-even Prices
Similar to charm pricing, an odd-even price model only uses figures that end in an odd number. People are more likely to buy items with prices ending in odd numbers. A 2021 online food retail study confirmed this.
3. Time Constraints
Don’t miss out! Only 1 day left to save 20%! These phrases are common in email subject lines and across social media. They encourage people to act fast and make a purchase by inducing some consumer FOMO, aka fear of missing out. Not surprisingly, 60% of sales marketing is driven by FOMO strategies.
Buy six boxes, get half a dozen free. It sounds off-putting, even though it’s the exact same bargain as “buy one, get one free.” Why does the latter work so much better? Our brains favor simple math, so something as straight forward as 1 = 1 makes more sense to us instinctively than 6 = half of 12 free, even though it’s the exact same thing.
5. Drop the .00
When you walk into a coffee shop and see a new latte on the menu for $2, it seems like a steal. Especially next to the others that are $3.00. Does the dollar really make that much of a difference? You’d be surprised! Showing a single figure instead of a full price with .00 attached can trick people into thinking they’re paying less.
6. Put It in a Package
People love bundles, and their brains assume that packages are bargains, even if they cost more than just buying something they want individually. In fact, people are more likely to buy a slightly more expensive package if it contains everything all-in-one, rather than having to make multiple transactions. It’s the flat-rate bias that makes all-inclusive resort packages with breakfasts so much more enticing than booking a hotel and then finding a restaurant.
7. Make the Price Smaller
Using a smaller font can actually make people believe that the price costs less. A 2005 research paper revealed that smaller price tags impacted customers’ perception, even though they weren’t really being offered a great deal or saving any money.
8. Move Your Prices to the Left
When you place prices to the left of a page or advertisement, they seem less daunting than when they’re displayed at the right. This is because our eyes naturally move from left to right, so objects placed to the right tend to be perceived as “heavier” than others.
You can also consider how our brains learn to read number lines or rulers; as we move from left to right, the numbers get bigger. So, as we read a page, moving from left to right, a price could seem higher by the time we reach it.
9. “Free” Offers
When something is given for “free” in a price, no one really cares whether it’s actually a good deal. Their brains get excited by the fact they’re getting something on top of their purchase. So when a company says “free shipping,” people are more willing to buy more expensive items, even if the actual cost of shipping is factored into the products’ total cost.
10. Anchor Pricing
Our brains thrive off reference points. When we have a sense of stability and control, we feel more empowered, and we’re more likely to make a decision. Anchor pricing involves showing customers an item, then making it appear cheaper next to other options. As a result, they make a purchase for what you wanted them to buy all along.
As a bonus, some customers may actually decide they like the alternative more, and perceive its value as greater because of its slightly higher price tag. So, giving your customers an “anchor point” while they shop can lead to higher sales all around.
11. Say Goodbye to Commas in Prices
For some reason, people think prices are less when they don’t contain commas (think $1500 vs $1,500.) Although the amounts are equal, creating physical space within the figure can cause people’s brains to perceive it as larger.
12. Use Genetics to Your Advantage
Men tend to shop with a goal in mind. Their brains tend to operate more on the left-side, which makes them lean toward quick, easy, and logic-based decisions. So, pricing for men's items should be more straightforward and visible from the get-go.
Women, on the other hand, have thicker corpus callosums, the thick tissue that connects the left and right hemispheres. As a result, they tend to deliberate far more. They are more likely to explore options, find discounts, and compare possibilities. So, you could benefit from anchor pricing or different sales options throughout a female-oriented layout.
13. Drive Emotions, Not Sales
If you sell products with high emotional value, such as engagement rings or anniversary gifts, focus on the emotions behind your buyers’ choices. They’re more likely to invest in something (or someone) they care about, so it’s far less about the price than the meaning behind what they’re getting.
By homing in on emotional impact, you can get customers to make larger purchases because in their eyes, it’s a stronger gesture for their loved one.
14. Put the Product Before the Price
You want your audience to see a product before they know how much it costs. Why? Because hen people see products first, they think about its value and how much they’re willing to pay. This is called .
If people see a price first, they decide right then and there whether something is a “good deal.” This can easily backfire and result in more people thinking your product isn’t worth what it costs.
However, the opposite strategy works better for logic-motivated or problem-solving products. Placing the price first will encourage buyers to make the most rational decision. So, they’re more likely to buy from a brand that has economical solutions.
15. Put Time Before Costs
People will spend more money if it saves them time. In fact, the premise of saving time can drive in more buyers than the promise of saving money. This is due to the time vs. money effect. Customers want to avoid spending more time doing things than necessary. They tend to operate from a temporal scarcity mindset. That’s why the time-sunk fallacy is so difficult for people to get over — they feel like they’re losing something if they get rid of an object, relationship, or even job that they’ve invested a lot of time into.
16. Use a Decoy
With decoy pricing, customers tend to make a higher purchase when they’re deliberating between two options and presented with a third “decoy” option. This third option is the same as the others except for one inferior quality. As a result, customers are turned away from the third, and their desire to buy one of the original two is reinforced.
The goal is a decoy in psychological pricing is to make customers realize how great the other deals are. They see options A, B, and C together and think, “No one would ever buy C.” Then their attention shifts back to A and B. Now imagine that B is really a combination of both A and B, or A, B, and C. Suddenly option #2 is the best on offer, even if it’s the most expensive.
17. Change the Appearance of Sales Figures
Having a discount? Go for bold. Customers are more likely to buy during a sale when the discounted item’s font is displayed more noticeably than the original price. Changing the color can make an even bigger impact. Red is a common discount color that motivates people, because it’s more vibrant compared to the traditional black of regular pricing on web pages.
Even if a sale isn’t massive, seeing it displayed in high contrast to the original figure can make it seem like a fantastic deal.
18. Go for BOGO
Buy-one-get-one offers always convert more because people have the idea they’re gaining something for free. Even though they may still pay for a discounted BOGO item, their brains feel as though they’re getting more bang for their buck.
You’ll likely notice BOGO sales are big in retail fashion, where buying one article of clothing allows someone to purchase another for half the price. You’ll likely find customers buying multiples of clothing, usually in different colors. Although the final price of their transaction is higher than it would have been without a sale, they feel great about buying something at a discount.
19. Frame Your Prices
Have you ever seen something advertised for “the price of a cup of coffee”?” This tactic is called price framing. It is similar to anchoring in that it gives people a reference point to make a decision. We generally associate a cup of coffee as a small, affordable luxury. So, having an item compared to something we already consider a good deal means we’re more likely to think of it favorably as well.
20. Go for Prestige Pricing on High-end Items
If you sell anything luxurious, consider raising the price considerably and playing into customers’ sense of pride in their purchase. Why would someone want to buy a $5,000 purse? It’s not because there aren’t amazing bags for $500 or even $50. It’s because the thought of owning a purse worth $5,000 fills them with a sense of importance and achievement.
Prestige pricing can be super effective in the right niches, like home goods, appliances, and luxury retail.
21. Hold a Flash Sale
Playing into FOMO again, hold routine flash sales that give customers only 24 hours or less to make a purchase. The thought of being able to strike and score makes them feel accomplished, even if the discounts aren’t that big.
Consider pairing a flash sale with items that a lot of customers have viewed recently or left in their carts.
22. Create Product Lines
Offer products in different categories based on their price range, such as “budget-friendly,” “mid-range”, and “high-end.” Those adjectives alone speak to the emotional valence of the items. Customers who are focused more on logical decisions will opt for budget-friendly objects, while those in it for emotional gain are more likely to opt for high-end purchases.
23. Play Into Intrinsic Motivations
Segmenting your audience is great because it allows you to understand why some consumers are motivated to buy certain products over others. By learning more about different groups in your target audience, you can customize their buying experience to reflect their intrinsic motivations.
In psychological, intrinsic motivations tend to always outweigh extrinsic ones. So, if you know what really makes a portion of your audience tick, you can inspire them to take action through targeted marketing efforts.
24. List Higher Prices First
In a 2012 study, researchers found that customers were more willing to buy an expensive beer over a cheaper alternative if it was placed on a menu organized from high-to-low prices. This could be in part due to the framing effect, in which people tend to think of things as good or bad depending on how they’re presented.
If you place more expensive items first, people might assume they’re naturally worth more, more popular, and therefore the best option.
25. Send Reminders While People Shop or Shortly After They Leave Your Site
People remember what they didn’t do more than what they did. And their tendency to remember unfinished tasks allows you to use the Zeigarnik effect to your advantage. By timing your reminders, you can subconsciously encourage people to return to your store and complete a transaction.
Incorporating a multistep purchase model that includes offerings for product bundles or additional items can also encourage greater sales.
26. Position Higher Priced Items as Upgrades
People will pay more to gain something when they already like an item. It might be harder to convince them to spend $100 as a base figure, but when they get an upgrade for $25 on top of a $75 purchase, the total transaction feels more valuable.
27. Stack Discounts
People are more likely to make a purchase during sale with combined discounts, even if they could get the same money off with a single discount. Why? Because people see higher quantities as being more valuable when it comes to money.
We don’t want to spend a lot, but we do want to save as much as we can. So, combining a 10% coupon with a 20% limited-time sale feels like a greater deal than one 30% offer.
28. Encourage People to Jump on the Bandwagon
The bandwagon effect is exactly what fuels our trend-driven economy. People want to do what other people are doing. That’s why many sites will show stats like, “100 other people bought this recently,” or “Currently in 30 shoppers’ carts” on product pages.
29. Time Sales Around Pay Periods
It’s more difficult for people to spend discretionary income when they’re on a budget. That’s why sales can be more effective toward the end of the month, before most people have gotten paid. Alternatively, big-ticket promos can be more impactful during the first week of the month, when a lot of people tend to get paid.
30. Wind Down Discounts
We know that flash sales and limited-time offers are effective, but slow discounts can work, too. You can give people the idea that they may miss out but they can still cash in and benefit from taking advantage of a discount before a sale ends.
So, you may kick off a sale at 30%, drop it to 20% after 3 days, then down to 10% by the end of the week.
There are lots of psychological pricing strategies brands can use to motivate their customers to buy more frequently, purchase more expensive items, or become repeat customers. What really matters most is knowing your audience well, understanding their motivations, and knowing which tactics are likely to work based on their income, budget, and desires.
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