Psychological pricing is the practice of setting product prices based on behavioral economics research about how consumers perceive and respond to numeric value representations. Some examples include:
- Odd penny pricing (e.g. $9.99 instead of $10)
- Anchor pricing (e.g. “Was $50, Now $40”)
- Prestige pricing (prices ending in 5 like $35)
The goal is to influence purchase decisions through persuasive pricing cues, rather than prices alone. Techniques tap into mental shortcuts like anchor effects and consideration of cent amounts as value indicators.
Studies show prices including 99 cents seem smaller and products priced near round numbers like $10 more affordable. Psychological influences even work when customers rationally understand the tactics.
While controversial, these minor price adjustments can increase perceived value and boost conversion rates. Dynamic psychological pricing also considers behavioral shifts across cultures, generations and segments.
Used judiciously along with competitive prices, psychological techniques aim to maximize sales volume through subtle price signaling effects on shopper psychology.