Imagine this: You’re at the supermarket. And as you peruse the aisles, you spy a deal: $10 for 10 tubes of toothpaste. It seems too good to pass up, so you load up your shopping cart with 40 units, only to feel a deep tinge of regret when you get home and ask yourself: What am I going to do with so much toothpaste?
Such is the allure — and power — of psychological pricing. In a nutshell, psychological pricing is a strategy that relies on pricing to elicit an emotional response from you, the consumer. In other words, different prices will have a different psychological impact. This in turn affects your spending or saving habits. The end goal? To get you to spend more than you’d like.
Here, you’ll learn:
• What is psychological pricing?
• What are common marketing pricing tricks?
• How can you not fall for these psychological pricing tactics?
What Is Psychological Pricing?
As mentioned briefly, psychological pricing is a sales strategy that focuses on how pricing can impact you, the shopper, emotionally and psychologically. As different prices will have different effects, these tactics can influence your spending and saving habits and get you to spend more. By understanding and dodging these moves, you may be able to quit spending money so freely.
How Does Psychological Pricing Work?
One of the main reasons why psychological pricing is so effective is that, as consumers, we rarely know how much something should cost. Instead, we lean on cues, context, and the prices of similar items to clue us in on whether something is a bargain.
These tactics can fool your brain and often offer the illusion of a deal. Unless you are an expert in supply chain finance or are a human supercomputer who can assess the total costs and lifecycle of a product, it’s hard to gauge how much something should cost. Marketers may count on that and use it to their advantage, tempting you to buy when you don’t need to or when the price is perhaps not as appealing as it may seem.
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15 Examples of Psychological Pricing Tricks
1. Charm Pricing
Ever wonder why the price of that shampoo is $4.99 and not $5.00? Enter charm pricing. Charm pricing operates using the “left-digit” bias. This means that the digit that’s leftmost in a price will impact the consumers’ perceptions the most. In other words, the number that’s to the farthest left will “charm” you into thinking the price is lower than it actually is.
In turn, a retailer will use the numbers “5” and “9” instead of rounding up the price. For example: $495 versus $500 may make you believe the price is closer to $400 than $500. Another example: $8.99 versus $9 can make you think the price is closer to $8 and not $9.
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2. Odd-Even Pricing
This kind of pricing trick marketing is along the same lines as charm pricing. The reasoning behind odd-even pricing is odd and even numbers affect one’s perception of the value of an item. Interestingly, prices that end with odd numbers make the price of something seem less expensive. On the flip side, prices that end with an even number or that is rounded up makes something seem more expensive, and in turn a luxury item.
3. Decoy Pricing
With this pricing tactic, you’re led to a particular choice by being offered inferior options or options that seem “not good enough” or “too pricey.” You can think of this as Goldilocks pricing, where the middle option seems the best deal or choice.
For example, you’re shopping online for dog biscuits for your furbaby Fido. In doing a bit of comparison shopping, you find similar boxes of pumpkin doggie biscuits; in fact, there are three different options. The least-expensive option doesn’t seem like you’re getting the best quality or the most bang for your buck, and the most-expensive option seems like you’re going overboard. So you go for the mid-priced choice.
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4. Buying in Bulk
Warehouse membership clubs and discount retailers are filled to the brim with buying in bulk deals. For instance, “Buy 2, Get 1 Free” or “10 for $15.” Sure, you might be saving some dollars off of retail, manufacturer’s suggested price, or full price, but at the end of the day, you are spending more than if you just bought a single item. Are you really saving on a $2.50 tube of toothpaste if you spent $40 and bought more than you need? Will you really be able to eat through that 24-pack of yogurts before they reach their expiration date?
5. Price Appearance
The design or look of prices can make a difference in how it’s perceived. For instance, prices that are in a smaller-sized font and don’t have the zeroes tacked onto the end make it appear less expensive. For instance, “$40” can seem cheaper versus “$40.00.” Longer prices can strike us as more expensive. Why’s that? Simply because it takes longer to read them.
6. Removing a Comma
Similar to the price appearance tactic, removing a comma will make the price seem lower than if you included that little bit of punctuation. That’s because including a comma makes the price take longer to read. If you make something phonetically shorter (i.e., it takes less time for the brain to read and process), it may trick the brain to think the price is lower.
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7. Fake Time Constraints
These limited time offers are set up by the retailer to create a sense of urgency — all so you act quickly and part with your money. For example, you may see an offer that says, “50% off for this weekend only!” These constructed time constraints can have you moving quickly, at times impulsively, and get you to spend more.
Quick Money Tip: When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for an online bank that doesn’t charge you for overdrafting.
8. Emphasis on Emotion or Nostalgia
By tapping into the allure and pull of nostalgia — an item that reminds you of your childhood or is associated with happy memories from the past — retailers can get you to part with your money. Because you long to relive those fond, happy times, you might not worry as much as the cost of something.
Similarly, tapping into a strong emotion, such as joy, family, adventure, and general warm — happy vibes, either through packaging, marketing, or brand messaging, can urge you to spend money.
9. Innumeracy
This psychological pricing tactic draws on what you might call “being bad with numbers.” Research that reveals that most consumers don’t have a grasp on basic mathematical principles to figure out what is a better deal when shopping. For instance, “buy one, get one free” sounds better to most folks than “two items at 50% off,” and they’ll often be convinced to buy by the first phrase.
10. Removing the Dollar Sign
Prices with dollar signs can make you feel a bit of fear or anxiety that comes with having to spend money — especially if it’s money you don’t have. Retailers often know this, so sometimes they will remove or reduce the size of the dollar sign to nudge you towards shelling out some bucks.
11. Bundling
This pricing tactic involves grouping together a couple of items that go together and offering a slightly discounted price. For instance, you might see a men’s grooming kit that ends up being 25% less expensive than bought separately.
This strategy makes you feel as if you’re saving money, when in fact, you’re spending more than you need to — especially if you really only need one of the products included in the bundle. If you fall for it, you are walking out of the store with more than you intended to buy and less cash in your account.
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12. Limits Per Customer
When limits are placed as to how much you can buy of a certain item, it tricks you into believing that the product is scarce and you’d better hurry and buy it. Or it might lead you to think the price is so low that the retailer can only offer so many at that price before they start losing money. Because of this, you might buy up to the limit in order to not forgo a great score or bargain.
However, you have no proof that any of these assumptions are correct. It could just be clever marketing at work.
13. Showing the Real Price Next to the Sale Price
Also known as anchoring, seeing the retail price next to a sale price makes it seem like a real bargain. For instance, seeing the sale price of $14.99 next to the full price of $19.99 can make you feel as if you are saving big (or perhaps bigger than you actually are).
By “anchoring” your decision based on the full price, the sale price will appear to be a great deal. You often see this tactic at discount grocery stores and off-price department retailers.
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14. Showing the Daily Equivalence
You’ve probably come across this tactic. A company will break down the cost of a product or service per day, which makes the cost seem negligible. For instance, a $60 a month cloud storage service breaks down to $2 a day. Or a $15 a monthly streaming services subscription equates to 50 cents a day.
By highlighting these daily costs, it can seem like you’re spending very little each day on a product or service. This might convince you to throw down some cash.
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15. Using Fake Reviews or User Generated Content
While there are obviously some ethical questions around this, using fake reviews can create the appearance that a product or service is getting a lot of buzz. And if something is popular, you might be enticed to jump on the bandwagon and see what everyone is talking about. It could make you buy something that’s lower quality, or spend more.
User-generated content can also be used to create a similar illusion of demand. A micro-influencer on a social media platform, along with viewer comments also raving about something, can also make an item seem valuable. Or some companies may reward customers with discounts if they share how great an item is. It gives you the impression that you must buy or will experience FOMO (fear of missing out).
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Can You Do Anything About Psychological Pricing Tricks?
While psychological pricing tricks are pervasive and can certainly dupe you into spending more, there are ways you can avert them:
• Create a 30-day list. Instead of purchasing things on impulse, jot down things you would like to buy, along with the price. Then wait 30 days. Chances are, the initial urge to purchase the items will have fizzled.
• Consider the personal value of an item. Instead of fixating on the price tag of something, consider the value it would bring to your life. Is it something you would get a lot of joy from? Or something you could really use? Let that guide you, vs. buying an item because everyone else has it.
• Figure out the number of uses of an item. If you plan on wearing a pair of jeans at least 30 times, and they cost $90, that’s $3 per use. Something you can afford and would enjoy having? Then it might be worthwhile. But if it’s a $20 item and chances are it will most likely get shoved into the closet, that might end up being a waste of money.
• Stick to a weekly budget. It’s no fun having to get your finances back on track after blowing your budget. Avoid that by keeping a weekly number in mind for your discretionary spending — think clothing, entertainment, eating out, hobby-related spending and sundry items. This can help you stay within your means. It could be helpful to have a separate bank account where you park your discretionary funds into. It’s far easier to see exactly where your money is going that way.
The Takeaway
Psychological pricing tricks can certainly sway you to dole out more cash. That being said, if you are aware of them, you can use good judgment about these marketing tactics. That, in turn, can allow you to stay within your means, make the best financial decisions for your situation, and stay in control of your cash.
FAQ
Is psychological pricing illegal?
Psychological pricing typically isn’t illegal, though in some cases, the tactic could veer into some other murky territory that might not be legal. But for the most part, these pricing tricks are acceptable ways of getting consumers to believe they are getting a deal or that an item is in high demand.
Is psychological pricing immoral?
There are some instances where pricing tricks border on unethical terrority. For instance, using fake reviews to make a product seem more popular than it really is and to generate hype is considered unethical.
Why is psychological pricing effective?
Psychological pricing is effective because it relies on your brain making snap judgments in spending situations. These tactics can steer you toward choosing a particular product or buying more that you may truly need.
Photo credit: iStock/recep-bg
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