Psychological Pricing: Advantages and Disadvantages of Different Techniques
When you’re marketing a product online, you know that every data point of communication can matter in a shopper’s purchase decision. Your visual merchandising should be crisp and appealing, your copy should speak to features and benefits, and your funnel of clicks should be easy and fast.
And of course, your price is super important. But while some online product marketing best practices might be common sense to the seasoned e-commerce warrior, the reasoning for choices around pricing can be murkier. Everyone knows there’s a psychology at play that can work on the shopper at a level below that of rational calculation. If we’re paying attention, we notice this in our own shopping experience. But many of us don’t really know how to play this psychological pricing game confidently as brands and sellers.
Little numbers and big numbers
When you’re making pricing decisions about your products, the big numbers usually take care of themselves. You have a general idea of a price you want to hit that takes into account your costs, your competitors’ prices, all your research on the market—and of course, it’s a price that allows you a profit margin you’re happy with.
The little numbers are harder. Should you price your item at $34.99? Is $35.00 better? If $34.99 is good, then…is there any benefit to $34.97?
The little numbers are involved not much in your profit, but very much in the shopper’s psychology. And though the reasoning for adjustments of a few pennies in one direction or another can be murky, there are a number of solid, proven tactics you can use to increase the appeal of your offers on the digital shelf.
The use of a .99 cent (or similar) price in place of a higher .00 price is called charm pricing, because it’s supposed to charm you into opening your wallet. Charm pricing works psychologically because, as you read the price from left to right, your brain reacts to the dollar value before it processes the cent value. If the dollar value is lower, that’s better for your prospect of a sale. Figuring out that $1.99 is almost exactly equivalent to $2.00 is higher-level thinking that a shopper may or may not arrive at.
Setting up prices visually
Charm pricing takes advantage of the way your brain—below the level of rational thinking—processes a price in the visual field. There are a number of other psychological pricing plays that work in the same way.
For instance, for your subconscious mind, big shapes can correlate with big amounts, and small shapes with small amounts. If you’re worried that your shopper will be sensitive to your prices, it might be advisable to make them visually less big and “loud” where they’re displayed. What’s important here isn’t their absolute size in inches or pixels, but how they fit into their context. For an example of this principle, browse Amazon for a minute with your newly critical eyes. Amazon shows prices clearly, but in such a way that they never dominate the visual field of a product page or search results page. That’s what you want to go for.
A related trick involves the way that digits “face.” Researchers have found that we relate to individual digits in the same way we relate to bodies in this regard. If you see a person looking in a certain direction, you then look in that direction—their attention guides your attention. Similarly, you look in the direction that a digit “points.”
2, 3, 4, 7, and 9 point left. 1, 8, and 0 are oriented to the center. 5 and 6 point right.
What does this mean for pricing? One recommendation is to use smaller numerals after right-facing numbers (5 and 6) to focus attention on the lower value. In this theory, a price of $52 points us to the 2, and might make the item’s cost feel lower. Conversely, numerals that point left focus attention on whatever digits are in that direction. $10.79 points us to focus on the 10.
Really, everything about the way a price is displayed to the shopper can play into a perception of the product’s suitability and the item’s value. For better or worse, we judge books by their covers, taking extensive cues about the meaning and value of things around us from the way they present to our eyes. Here’s another visual pricing hack: Are you selling an item for over $1,000 and concerned about negative perceptions of your price? Consider removing the comma. $1489 seems quicker, less weighty than $1,489.
Despite the complexity and breadth of options for visually merchandising your prices, luckily, you don’t have to just rely on theory. One beauty of e-commerce is that by varying product page design and advertising creativity, you can test a number of different visual pricing strategies, measure your results, and find the look that works to sell your product best.
How’s it sound?
Do you talk to yourself when reading? That’s OK. Whether it’s out loud or silently, a lot of people process things they read in an auditory way—including prices. And besides that, people of course often shop in the company of friends, family members, or others involved in the purchase decision and speak prices out loud to them.
To expand on the lessons in the section above: as a brand or seller, you want your prices to seem light, easy, swift, and small to a price-sensitive shopper, not heavy, hard, slow, and big. How they roll off the (mental) tongue plays a role in that kind of perception. Removing commas in big prices is one way to “speed up” a price and make it seem less cumbersome. Without the comma, we’re more likely to say the price above as “fourteen eighty-nine” (5 syllables) instead of “one thousand four hundred eighty-nine” (9 syllables).
Smaller prices can benefit from the same logic. Consider the difference in “sound-weight” between, say, $28.15 and $27.57. Research shows that shoppers will find a phonetically shorter price to be less burdensome and so smaller-seeming. Other things being equal, a buyer’s favor might tilt toward the product with the price that she can say quicker.
Forget the cents?
We’ve discussed the advantages of charm pricing, but there can be disadvantages as well. Some brands and products can benefit most from the kind of psychological signals sent by “round” prices—for example, $45, or $60, without a decimal.
First of all, round prices feel “easier.” If you think your shopper is in a spending mood, a round price might help her pull the trigger on a purchase. In this way, they can appeal to customers shopping at very different price-points; a $1 checking-lane chewing gum purchase at one end, a $200 jewelry splurge at another.
Round prices can also work better for items with which the shopper feels an emotional connection. Remember, giving a shopper ease and swiftness in their mental processing of your price can make it easier for them to say yes to your offer. If they’re already emotionally attracted to a product, then a simple, round price can chime with their willingness.
Round prices might also communicate that the product—or the intended buyer—affiliates with a higher than median social class. This tactic is often part of a strategy called prestige pricing, in which a brand prices high rather than focusing on value. Does your product appeal to a buyer who simply doesn’t need to care about cents after the decimal point—or, at least, do you want your buyer to think of himself that way? Round prices could be especially appropriate to a product that wants to evoke one or more of the associations of class, such as taste, style, quality, design, and luxury.
And finally, for the more savvy or skeptical shopper, round prices might simply communicate honesty and plain-dealing.
Can I avoid psychological pricing?
Yes…and no. While there are advantages and disadvantages to different psychological pricing approaches, the above examples suggest that there’s no real way to escape people’s subrational habits of perception. Unless you know that you’re selling to a supremely rational person, you’re already involved in the game of psychological pricing, whether you like it or not. Even avoiding the appearance of price “games” by setting a round price can itself be a price game.
So, the task then is really just to do psychological pricing well, in full awareness of the psychological valences of your pricing choices. If you believe in the quality of your products and brand, then you’re not at risk of being manipulative or unethical. You’re communicating with the shopper on a deep, intuitive level in order to guide her to the right purchase choice—buying from you.
For more tips, we recommend this page created by the writer Nick Kolenda. And for help in keeping your prices at the levels you set across all your sales channels, we recommend MAP Policy Partners’ MAP monitoring and enforcement services.