What Do You Mean By Psychological Pricing?


Psychological pricing is a pricing strategy that impacts a customer’s purchasing behavior. In today’s highly competitive business environment, businesses continuously compete for customers’ attention and attempt to overtake one another in terms of product quality, marketing, and price methods. The psychological pricing strategy is one such method that has gained favor among businesses. Setting pricing that appeals to customers’ subconscious and generates an impression of value is the goal of this strategy. This article will discuss psychological pricing, several types of psychological pricing, and examples of psychological pricing strategies. 

What Is Psychological Pricing? 

Psychological pricing is a marketing strategy that uses price tactics to affect consumer behavior and perception by using the power of human psychology. It is founded on the premise that when it comes to purchasing decisions, customers are not always rational and are frequently influenced by perception, emotions, and cognitive biases. 

Psychological pricing example includes the usage of prices ending in 9 or 99, known as the “left-digit effect,” which is one of the most popular psychological pricing tactics. According to studies, customers perceive prices ending in 9 as lower than they actually are, which might stimulate demand for the goods. 

Another method is to utilize “charm pricing” or “odd-even pricing,” in which prices are set just below a round figure. Examples of psychological pricing strategies include pricing a product at $4.99 rather than $5.00 can make it seem more affordable and increase sales.  

Why Do We Need Psychological Pricing? 

Psychological pricing is a great marketing tactic that organizations may utilize to get a competitive advantage in today’s market. Here are some of the reasons why psychological pricing is essential: 

  • Influence Customer Mindset 

Psychology pricing strategy can impact how buyers perceive the worth of a product. For example, by selling a product at $99 rather than $100, a company might give the impression that the product is more reasonable, attracting more purchasers. 

  • Increase Profit Margins 

Pricing may also assist firms in increasing profit margins by helping them price their items more effectively. Businesses, for example, might use dynamic pricing to alter prices in real-time depending on demand, supply, and other market conditions in order to optimize profits. 

  • Keep Ahead of the Competition 

Businesses must continually develop fresh methods to differentiate themselves from competitors in today’s competitive market. Psychological pricing may help firms differentiate themselves by making their items more appealing to customers. 

  • Use Consumer Psychology 

Businesses may utilize psychological pricing to get into customer psychology and create a more engaging and customized shopping experience by knowing how consumers make purchase decisions. 

  • Boost Your Sales  

Businesses may enhance sales and income by using the power of human psychology. Psychological pricing strategies such as odd-even pricing, anchoring effect, and price bundling can entice customers to buy. 

Types of Psychological Pricing   

Psychological pricing strategies benefit businesses in a variety of ways. Using and developing the best pricing strategy is critical for converting viewers into purchasers. Companies must consider how their target customers react to various items and sales. After this is determined, businesses may choose the optimal psychological pricing method for them. A psychologically set price helps firms attract customers while making purchase decisions. Here are six common types of psychological pricing strategies: 

  • Charm pricing and odd-even pricing 

This strategy involves setting prices that end in odd numbers (such as $4.99) or even numbers (such as $4.00) to make a product appear more affordable and attractive to consumers. This is based on the idea that consumers tend to perceive prices ending in 9 or 99 as being lower than they actually are and prices ending in round numbers as more expensive.  

According to research on psychological pricing in online food shopping, 70% of Amazon Fresh prices end in the number 9. And treats or special purchases were more likely to have a price ending in 9 than required supermarket staples such as fruits and vegetables.(Reference) 

  • Slashing the MSRP 

This strategy involves listing the manufacturer’s suggested retail price (MSRP) for a product and then showing a discounted price to make the product appear to be a better deal. This is based on the idea that consumers are more likely to make a purchase when they feel like they are getting a good deal. For example, a product may be advertised as being “50% off” at the original price, even if the original price was initially inflated.  

The company uses the MSRP as an anchor to give buyers the impression that they have genuinely saved money on an item. A similar indication of savings may be seen in online shops where the MSRP may be crossed out and the new price placed next to it. 

  • Artificial time constraints 

This strategy involves creating a sense of urgency around a product by offering it for a limited time only or by setting a deadline for sale. This is based on the idea that consumers are more likely to make a purchase when they feel like they might miss out on a good deal. Although a company’s website may indicate that a deal is ending, the discount may reset in a few hours and continue. The secret is to convince customers that the end is near so they will buy. 

Companies employ artificial deadlines to create a sense of urgency. Customers are encouraged to purchase quickly before the offer finishes or before their favorite items run out of stock during single-day events or sales that end in a few hours. For example: Only for today! Only a few hours left! Early bird sale!  

  • Innumeracy

Innumeracy strategies use basic math to select the option that a consumer finds more appealing. This strategy takes advantage of consumers’ difficulty with numbers by using small font sizes or complex pricing structures to hide the true cost of a product. The buy one, get one free option sells better, even though the math is the same, and consumers believe it to be a superior offer. 

For example, a product may be advertised as “only $0.99 per day” rather than $30 per month. This is based on the idea that consumers are more likely to purchase when the total cost is unclear.  

  • Price Appearance  

This strategy involves using packaging, design, and other visual cues to make a product appear more valuable than it really is. Price appearance can influence the way your customers feel about it. However, simply the presence of a dollar sign might cause buyers to experience the “pain of paying,” according to a New York Times story. The ideal path? Delete both the dollar sign and the cents. 

For example, a luxury product may be packaged in a way that makes it appear more expensive than a similar product that is actually less expensive. This is based on the idea that consumers are more likely to pay more for a product that appears to be high quality. 

  • Flat-Rate Bias 

This strategy involves setting a flat rate for a product or service, which can create the perception of fairness and simplicity, even if there are more cost-effective options for consumers.  

For example, a subscription service may offer a flat rate for unlimited access to its content, even if the customer only uses a small portion of it. This is based on the idea that consumers are more likely to choose a product or service that they perceive as simple and fair. 

Advantages of Psychological Pricing  

There are several advantages of using psychological pricing strategies, including: 

  • Increased Sales: Businesses can increase sales and revenue by using pricing strategies that influence consumer behavior and perception. 
  • Improved Profit Margins: By using pricing strategies to increase a product’s perceived value, businesses can charge more for it and improve their profit margins. 
  • Competitive Advantage: Businesses can gain a competitive advantage in the marketplace by using pricing strategies that set their products apart from competitors,  
  • Improved Brand Perception: By using pricing strategies that create the perception of value and quality, businesses can improve their brand perception and reputation among consumers. 
  • Better Customer Relationships: By using pricing strategies that create a sense of fairness and transparency, businesses can build better relationships with their customers and improve customer loyalty. 

Disadvantages of Psychological Pricing  

Here are some potential disadvantages to be aware of, including: 

  • Risk of Deception: Psychological pricing strategies perceived as deceptive or misleading can damage consumer trust and brand reputation. 
  • Perceived Unfairness: Consumers may perceive certain pricing strategies as unfair, such as variable or dynamic pricing, damaging consumer trust and brand reputation. 
  • Difficulty in Implementation: Some psychological pricing strategies, such as personalized pricing, can take time to implement effectively and efficiently, creating operational challenges for businesses. 
  • Limited Effectiveness: Some psychological pricing strategies may not be effective for all products or markets, and their effectiveness may depend on the specific context and consumer behavior. 
  • Potential Loss of Customers: Some consumers may be sensitive to certain pricing strategies and may choose to shop elsewhere if they feel they are being manipulated or taken advantage of. 


A pricing approach known as psychological pricing uses various techniques to change customers’ perceptions and behavior. Based on psychological and consumer behavior concepts, this strategy employs strategies including odd-even pricing, charm pricing, and artificial time limits to create a sense of value and boost sales. Businesses may obtain a strategic edge, enhance customer impression of their brand, and boost revenue by utilizing Psychology’s pricing strategy. Business Analytics involves using data analysis to make informed business decisions, including pricing strategies. Most genuine Business Analytics programs provide a strong foundation for understanding how to apply psychological pricing in a business setting.  If you want an Integrated Program In Business Analytics certification that can accelerate your career growth, UNext is highly recommended. 

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