Pricing psychology is a strategy based on the fact that certain dollar values affect the mind differently. It is all about how different price points make you feel, and whether those appearances lead to a sale.
A well-known example is charm pricing, which works by reducing the left digit by one. By labelling an item as $3.99 instead of $4.00, a buyer, who doesn’t take the time to think about the price, gets the message that the cost is closer to 3 dollars rather than 4.
This psychological pricing strategy aims to disguise a higher price for a lower price. This strategy, however, is not the only one that aims to fool you. A lot of research has been perform to identify different ways to make the value seem lower, without an actual reduction in price. In this article, I’ll show you three examples of psychological pricing.
Pricing Psychology Strategy #1: Syllables
The human mind perceives prices to be lower when they contain fewer syllables, as a 2012 study published in the Journal of Consumer Psychology shows.1 That is, when we encounter a price tag with many syllables, such as twenty-one-eighty-two (7 syllables), and compare it to a value with fewer syllables, such as twenty-two-sixteen (5 syllables), we perceive the cost to be smaller because it contains fewer units of pronunciation.
Count the syllables next time you are planning on making a large purchase. Chances are that the sale price contains fewer than 5 or 6 syllables. Remember that the syllabic length influences the perceived magnitude, and that the price value is not low after all.
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Pricing Psychology Strategy #2: Font Size
Did you know that the visual size of the numbers on price tags corresponds to the perceived value? That is, if the numbers fill in the entire price tag, we feel as though the cost is large. Conversely, if the figure is taking up only half of the area with a smaller font and there’s plenty of whitespace, we consider the cost to be lower.
The reverse works for discounts. Retailers who want to maximize the size of the discount often display those numbers in a larger font size, in hopes to elicit an emotional response from the buyer. When shopping, take the visual magnitude into consideration; The size of the figure can be deceiving.
Pricing Psychology Strategy #3: Scratched Out Price
Another psychological pricing method works by scratching out the old value and then displaying a new and low price beside it. Seeing the original price as reduced and providing a reference point conveys the message that you are getting a better deal. Whether you actually save money on a sale, however, is sometimes questionable.
Take any Apple product, for example. A pair of AirPods Bluetooth headphones sell for $199.00 USD, the newest iPhone costs $799.00 USD, and the lowest tier MacBook Laptop comes in at a whopping $999.00 USD.2 Consider how much it costs for Apple to manufacture those electronics and you see that their prices are quite inflated. As of 2021, Apple sold its products with an overall markup of 42.5 percent over their total manufacturing cost.
Of course, you buy a premium product, represent the brand, and help Apple pay out wages to their 147,000 employees worldwide. But fact is, Apple sells overpriced and expensive items. When the full price for Apple product is scratched out, it might make it look like a good deal, but how much money do you really save?
It’s All About The Appearance of a Price
When I worked as a cashier for my parent’s bakery, I promoted a “four for the price of three” offer on pastries. Customers could buy one pastry for $2.50, or four for $7.50. The offer, I must admit, was well received. But on quiet days, when I had time to be creative, I joked with our regular customers, “You can buy one for $2.50, or 3 for the price of 4.” Though it sounded like an offer, I was actually asking customers to pay more per unit, just to see how they would react. Many agreed to the deal.
The strategies I listed in this article work because we, as human, tend to make a split-second decision about the appearance of an offer before understand the monetary value. This is because one part of our brain thinks fast, the other thinks slow. We are quick to understand the visual and auditory aspects of a price—syllables, font size, discounts—but our brain takes longer to process the meaning of a number. Different prices have different psychological effects on people.
The best way to protect yourself from emotional purchases is to slow down. Give yourself enough time and space to think rationally about a price, and you might see that pricing psychology is in effect. Perhaps the price contains a scratched-out price, small numbers, few syllables, or someone might even get clever and offer you three pastries for the price of four.
References
- Coulter, Keith, et al. “Comma N’ cents in pricing: The effects of auditory representation encoding on price magnitude perceptions.” Journal of Consumer Psychology, vol. 22, no. 3, July 2012, pp. 395-407, doi:10.1016/j.jcps.2011.11.005.
- The prices reflect the values presented Apple.com as of July 1, 2021