Is psychological pricing an effective strategy?

Price has psychological value. Buyers will buy a high-priced product because they believe that high price is a good indicator of value. Their perception isn’t based on reality, it’s based on psychology, so buyer behavior is affected by more than just the tangible product and price.

Interestingly, as buyers investigate product attributes more or the business promotes product features more effectively, that product knowledge (“familiarity breeds contempt”) allows buyers to make a more rational purchase decision, rather than psychological, and for buyers, prices move. down the value scale.

One of the uses of psychological pricing is in final price numbers. Buyers believe that prices ending in odd numbers, rather than even numbers (such as $9.99, $199,999, etc.) are a better offer or price than even numbers (such as $10 or $200,000). If the products to be quoted must be in a price ‘band’ (such as online auctions, cars, or other sales listings), if the listing price is in the odd range, say $199,000, it will appear in a lower rank. price range than the $200,000 listing and will be seen as a better value. The challenge with this strategy is that products ending in an odd number are often perceived as lower value as well. Make sure you choose the right price and the right strategy for your specific product or service.

Another use of the psychological price is the reference price. Reference pricing is when buyers have a psychological response to price that reflects how they view a price’s relationship to a specific product. A company could take advantage of reference prices and position its product among high value or luxury items to imply that its product belongs to the same category. Be careful with that positioning strategy, it can backfire if buyers feel like your product doesn’t really belong in that category.

For psychological pricing to be an effective pricing strategy, the product must have some characteristics that appeal to an ego-sensitive buyer. For example, luxury items are attractive to ego-sensitive shoppers. Premium recreational goods like boats are attractive to ego-sensitive shoppers. Your strategic planning model should ensure that the pricing strategy selected for your product or service is the best price.

Make sure your pricing strategy fits your product and market by testing the price before posting it to your entire target market. Also consider the impact that the other elements of the marketing mix have on your price: is the product the right fit for a psychological pricing strategy? Is the promotional program in tune with the pricing strategy? Is the location or channel of distribution in balance with price (ie should the product not cost more to ship than the product itself)?