Psychology of Price Promotions
Getting your pricing right is vital to attracting shoppers and encouraging sales, but the route to this can also be psychological. Using our experience in the psychology of promotions, we’ve put together 4 of the most effective ways to help you set the right price and get your customers spending.
It’s a common occurrence within retail environments to see prices ending in 9’s (e.g. 99p, £1.99, £9.99) – otherwise known as charm pricing – as it is believed to make a product appear less expensive and more appealing.
However, does this widely used pricing trick still work on today’s savvy shoppers? Apparently so. A meta-analysis of charm pricing studies revealed that using this pricing strategy can increase sales by up to 24%.
Reducing the Left Hand Digit
Although a reduction of 1p from an item can make it appear less expensive, charm pricing is most effective when the left hand figure changes (e.g. from £2.00 to £1.99). This is because we unconsciously anchor a number based on the first digit – so we would perceive £1.99 as closer to £1.00 than to £2.00 and therefore view it as significantly cheaper (Thomas and Morwitz, 2005).
When it comes to pricing, shoppers don’t always know what a product is worth, or may have no expectation of what they should be paying. Providing a more expensive comparison price can act as a reference point, and provides customers with an increased price expectation – therefore making the real price appear much more appealing.
Prices that contain more syllables are unconsciously deemed to be more expensive than those with fewer syllables (Coulter, Choi & Monroe, 2012). Skeptical? Indeed, the research reveals that the unconscious process of phonetically encoding written prices can determine our perceptions of that price. For example, £44.90 is phonetically shorter than £44.78, and so appears less expensive despite actually being more expensive.
Shopping Behaviour Xplained