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Discovering the psychology of price

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don't you remember seeing a product at 9.99 euros and wondering why not just leave it at 10 euros? Psychological pricing is a strategy based on the theory that certain prices have a greater psychological impact on customers than others. Psychological pricing is also a fundamental part of marketing, as this type of pricing appeals to the emotions of the consumer. There are many psychologically based pricing strategies that are valid for all types of businesses in order to maximise profit.

how to make a price more attractive?

Price plus value proposition:

A price achieves a greater impact when it includes a value proposition. For example, a product may cost 19 euros per month, but if it also says "Take advantage of this opportunity and save 50%" it has more impact. But if it says "This product saves you X amount of time, the value proposition is even greater. Some research reveals that consumers place more value on the relationship with time than on the relationship with money. When setting and displaying a price, it is important that you explain what problem you will solve in the form of time, for example, your customer will enjoy more time, will enjoy quality time, will have more time to be able to do other things, etc.

Beware of price comparison:

By comparing prices with competitors' prices you risk consumers buying the competitor's product or not knowing how to decide between a cheaper offer or an offer with a more recognised brand. In this case, consumers compare the two and only look at the disadvantages of the options leaving aside the advantages. In this way, you lose the value proposition you have put forward.

Not offering many price options:

Avoid consumers having to choose between several products that are good. Therefore, use the range of prices and products to steer your consumers towards a particular product. The customer's perception of your brand is more valuable than the prices. They will not be able to compare you across all ranges, so be cheaper or more expensive where it is more beneficial to your brand. In 2004, the American psychologist Barry Schwartz argued that offering many options to a customer causes anxiety generating "choice paralysis". Not only at the time of purchase, but because of the large choice of products available, consumers are increasingly dissatisfied with the products they buy.

The magic number 9:

Using this number at the beginning or end of a figure is one of the most powerful strategies that give the company the opportunity to reach the consumer's unconscious and make him notice that this price is better than those ending in another figure or with a rounded price. Using 9 denotes an offer or low price. If a price ends, for example, in zero, the customer is unlikely to be hooked on this price, as psychologically, he perceives this amount as a higher price. On the contrary, if the price ends in 99 or 90, the consumer will perceive that the product is on offer, which means a saving, no matter if it is only 10 cents or less.

5 strategies of psychological pricing

1. Round price

This consists of including a round price so that the consumer perceives that their purchase decision is perfect. It also serves to avoid "rational" doubts about the purchase, although in reality it is an emotional purchase and not a rational one, i.e. something they do not need. A clear example is the snacks we see in the supermarket, which usually have round prices of 1 euro.

2. Odd price

This is one of the most commonly used and consists of playing with the brain's perception of prices and can be applied in two ways. The first is based on establishing a price with odd numbers, as they are numbers that attract more attention and also give the feeling that the product is cheaper or is on sale. The second is not to use round numbers but numbers ending in 9, as subtracting a euro or even a cent generates the perception that the price of the product is much lower. It is not the same to read 100€ as 99.99€. Does the second option not seem cheaper to you?

3. Usual price

There are products on the market that have had the same price for years and the consumer is already accustomed to that price. If from one moment to another you change that usual price, the consumer would have a feeling of distrust. In this case the consumer does not think about whether a product is expensive or cheap, he just pays without asking questions because he is already accustomed to that price. Therefore, we recommend you not to modify those prices that have been on the market for years and that have generated a habit in your consumers.

4. Relative price

The relative price is the price of a good or service that is expressed in terms of another good or service. If we want our product to be considered "cheap" or "expensive" we must decide its relative price. This means that we must decide a price that is higher or lower than the competition. Likewise, the distribution in the shop will also influence the consumer's perception, as they will perceive it in one way or another depending on how it is positioned. For example, a consumer bought a bike that costs 2,000 euros, when he could have bought two low-end bikes for the same price.

5. Prestige pricing

By putting a high price on a given product, companies make the customer perceive it to be of higher quality compared to the competition. This strategy seeks to capture those consumers who identify with greater purchasing power and social status and who prefer a product that has a higher price, as it is a symbol of greater prestige. In this way, the consumer feels that they are buying a better quality product and that they are buying a recognised brand, despite the fact that they are often very similar products.

Apply price psychology to your products to get better results. And you, what psychological pricing strategy are you using?

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