You Absolutely MUST Know
You know how you go to a store and find an item that you like, but the price tag is too high? You want it, but your budget says “no.”
You walk around for a while hoping something else catches your eye. When nothing does, you finally give in and buy it at the higher price because of the value (or so you tell yourself). This is psychological pricing at work.
The goal of this post is to help you understand what goes on in your head when making decisions about product pricing. Most people don’t want to admit that they’re influenced by prices when making a decision on what product or service they purchase, but it’s TRUE.
Consider the idea of value
If something seems like good value for the price, then we feel better about purchasing it despite its cost. When something is priced too low (“too good to be true”) we may have suspicions that there must be some hidden secret in order for them to offer this thing at such an incredible rate; these things can cause us not only question whether or not we should trust the business behind the item, but also make us less confident in our own ability to judge quality from appearance alone since many times the value of an object is difficult to judge by its initial appearance.
Psychological pricing is the use of psychology to get people to buy a product. It’s a joint effort made up of pricing, marketing, and sales that gives an attractive offer so desirable that the consumer can’t help but want it right now. Psychological pricing is a form of marketing that has been used for decades.
It can be done in many ways, but the most common technique to employ psychological pricing tactics would be through the use of different prices on items based upon what they’re trying to sell you. Marketing and sales will put together an attractive offer so desirable that consumers won’t hesitate at all before purchasing it.
Businesses have been using the psychology behind how people make decisions about what they buy for decades, so it’s no surprise that marketers employ psychological pricing tactics in order to convince customers with certain ways of thinking more often than others into buying their products and services.
The price-value relationship is one way marketers have found success using psychological pricing techniques as well as anchoring or decoy products to persuade people into buying more than they originally planned. These routes are very effective when executed correctly, which should lead business owners who understand them better to want their company’s offerings over any other competitor out there!
Psychological Pricing Pros
- Product prices are more than just a way to increase item sales. With the right pricing strategy, you can strategically plan for things like perception of your products and comparisons with competitors.
- Psychological pricing can offer a bundle of value. Offering bundles is one way to take advantage of psychological pricing in your business and give the customer more than just what they came for at an increased price point.
- It’s not all about higher prices! If you’re offering a high quality or luxury product, customers are willing pay more because they want it so badly. So don’t be afraid to charge slightly higher fees from time to time if you know that this strategy will work with your target audience (or even really any type of market!).
- You get what you pay for. Sometimes people think expensive items are better quality products which isn’t always true but as long as there’s some truth behind it then psychologically it’s going to work.
- The customer feels like they’ve gotten a good deal because they paid more than what the item is actually worth and are usually happy with this decision.
- Can increase revenue by 20% or more when done right and there’s plenty of research behind it.
- Shoppers are less likely to return something if they paid a higher price because they feel like they’ve gotten their money’s worth. So you’ll have much lower rates of returns on items that people pay more for psychologically!
Psychological Pricing Cons
- Customers may not believe that your product is high quality if it seems overpriced in comparison to similar products, even though its value is higher or lower depending on where you’re looking at it from – so be careful when comparing.
- Psychological pricing strategies are often time consuming because they require plenty of research.
The psychology of pricing can really affect how customers feel about spending an amount of money on a certain product as well as how much value they think it holds. Always consider these variables before deciding which price point will maximise profit for both you and the customer.
What kind of different price points do you offer your audience? Write it down in the comment section below!