There are many things consumers consider when making a purchase. Some may be rational, looking for the best quality or value, and some a bit ‘non-rational’ or driven by the lowest price or quantity of what they are buying.
via: Tradus Blog
With every shopper looking for something different, a few different psychological pricing strategies can be used to maximize your selling efforts online.
Taking a lesson out of the real estate broker’s handbook, Odd-Even pricing can be used to imply the value of a particular item.
$9.99: Uneven or .99 pricing conveys a good value while also potentially being the lowest price. Psychologically, this appeals to a buyer’s familiarity with sale pricing, in that they will associate this number with a discounted price.
This strategy allows a competitive pricing band to keep the price of the item within certain pricing brackets although the price is only .01 cents less than a whole number. Real estate agents and brokers are notorious for this tactic, pricing a property $1-1,000 lower to make the price seem more affordable.
Conversely, the Even or .00 pricing implies a high value product and a standard pricing structure. These prices are more common when the value of the item is clear. This type of pricing can appeal to both the rational and non-rational buyer, as these buyers will favor an even number when looking for quality goods.
Have you ever seen a price at Wal-Mart or H&M that seems to be the lowest price you can get? Most likely it is due to the uneven numbers, particularly 4 or 7. When you see a pack of Energizer batteries priced for $3.77; it stands out in a big way. This is because the buyer expects a low priced brand name item to fall into the .99 category.
Wal-Mart has this pricing structure locked down. Everything in their online store is priced uniquely. This pricing strategy is interpreted by the consumer as being precise, cutting the excess fat off the normal $3.99 you would pay for batteries. [As if it were being directly converted from a Renminibi].
This strategy can produce a variety of results, mainly, because it is the strategy of options. Some online retailers are very successful with this strategy, because they pair several mediocre options with one great option. This option always floats to the top, implying that the consumer can be directed to choose one price or product over another.
Other retailers, mainly bigger, popular brands, can offer their customers a variety of options so they aren’t boxed in to choose one product over the other. For example, Apple offers similar technologies at various price points. You can get an iPhone that costs $199-$849 and benefit from the same OS, applications and user interface. It opens their brand up to several price brackets in the market, providing quality products and services to the masses.
Loreal is another great example, providing the public with three different segments at different prices. They have positioned themselves in the luxury market, professional market and consumer market, allowing open purchasing throughout. They give consumers the option to buy Kiehl’s Shampoo for $34, Redken for $25.99 or Garnier for $4.99.
They even employ the Odd-Even pricing strategy addressed above.
Psychological pricing can and does work. The goal of this tactic is to provoke an emotional response, whether excitement (low price), fulfillment (of a need, good value) or intrigue (ideal price).
While no one wants to admit that psychological pricing strategies are designed to manipulate; they most definitely do. It just all depends on who/what your end goal is.