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Psychological Pricing – Definition, Strategies, And Examples

The windows of your favorite store were covered in signs reading, "BOGO 50%!," haven't you?Then walked in and bought stuff you didn't even need because it was "ONLY TODAY!"In other words, if your answer is "yes," then you're a victim of the psychological pricing phenomenon, my friend.

But it's all right.Mental pricing strategies are employed by both retailers and restaurants.Is it useful for SaaS businesses?This article will explain what psychological pricing is, as well as some of the benefits and drawbacks, as well as some possible approaches and conclusions for your B2B company.

What Is Psychological Pricing?

Setting prices that aren't quite whole numbers is known as "psychological pricing."According to this belief, customers do not round up these prices, and as a result, treat them as lower prices than they actually are.As a result, customers tend to focus on the first few digits of a price rather than the last few digits.

Using a smaller font for the fractions of a price seems to magnify this effect even further.Pricing an automobile at $19,999 rather than $20,000 is a good example of this practice.Consumer goods frequently use this pricing strategy.

Increasing the price of a product in the hope that customers will value it more will be a variation on this concept.

4 Psychological Pricing Strategies

There are a variety of ways to employ psychological pricing techniques.Psychological pricing strategies include the following four methods of pricing:

Artificial Time Constraints

There is a one-day-only "BOGO!" promotion.In some form or another, we've all heard this commercial.

To elicit a sense of urgency, retailers will put an artificial time limit on a sale.Stores use time limits because they encourage customers to buy more.

Consumers are made to feel threatened by this psychological ploy.

They risk missing out if they don't take action now.

It's true, however, that there will always be another opportunity to buy.

Charm Pricing

This is the fancy and more official name for all prices that end in "9" in the store.It has been found that prices ending in "9" increase customer demand for products, according to MIT and University of Chicago researchers.People's brains are wired to read from the left to the right, according to research.If the price is listed as $1.99, the "1" is seen first, and they think the price is closer to $1.

The inverse is also true when it comes to the impact of charm pricing.If a price ends in "9," it indicates that you're getting a great deal.

On the other hand, prices that end in "0" may connote a higher quality product and a more prestigious price.

In order to make your product appear more valuable, you should avoid using charm pricing.


Despite the fact that "Buy one, get one 50% off" and "Buy two, get one 50% off" both result in the same price, most people choose the first option.When customers are unable to apply basic math principles in their daily lives, it is known as innumeracy, and this scenario perfectly captures the phenomenon.

An investigation conducted by Akshay Rao from the University of Minnesota School of Management found that consumers are less interested in discounts in favor of additional perks.Because we're mathematically challenged, we'd much rather receive more items than a discount.

Double discounting is a psychological ploy used in conjunction with innumeracy, in which the item is first marked down by a percentage and then further reduced by another percentage.For instance, a product may be marked down by a quarter of a percent.For an additional 20% off, the company will do so.Even though customers may think they are getting a deal worth $45, they are only saving 20% off the discounted price.

Price Appearance

An item's visual appearance has an effect on people's emotions.Even if they're the same number, longer prices appear to be more expensive than shorter ones.People subconsciously associate time with cost because longer prices take longer to read.

Surely you've come across this in a restaurant at some point.

Restaurant menus often use smaller fonts and do not include "0s" or dollars signs in the prices, making it easier to read.

The omission of the dollar sign shortens the price and removes the direct link people have to their wallets.

Examples Of Psychological Pricing

You've come into contact with psychological pricing strategies, whether you know it or not.Some of the tactics we just discussed are illustrated in the following examples.

After Christmas Sale

Most sales and promotions occur after a holiday, especially Christmas.Check out this ad on a retail website.

Example of after Christmas sale
Example of after Christmas sale

First, the ad is red.You can't miss it, especially with the word "SALE" in all caps.

This company uses several strategies, including innumeracy.

This ad has so many numbers and equations.My main takeaway is that there are deals to be had right now.

This company assumes people won't do the math and figure out how good those percentages are off.This is also double discounting.

Customers can save 20-50 percent on top of that (with a code).

In reality, the additional percentage is deducted from the already reduced price.

Exclusive Deal

Exclusive deal example
Exclusive deal example

Then there's the "exclusive deal" based on time constraints.

To get the advertised deal, you have to hurry up and click the banner at the top of the page.“Offer expires in Xhrs Ymin Zsec.”a ticking clock may cause panic in customersThey can see the time running out, urging them to buy now.

Menu example
Menu example

This example exemplifies the power of price appearance.

The menu is simple and easy to read.The prices are next to the menu item names.The prices are italicized and lack “0s” and dollar signs.

Because it's shorter, 14 appears cheaper than $14.00.


Knowing the market and figuring out what type of customer you have will help you make better decisions.

They'd prefer round numbers if they were rational, and the irrational market prefers square ones.A pricing strategy won't work if it's being used in the wrong market.

The market and customer behavior must be studied before any strategy can be implemented.

About The Authors

Keith Peterson

Keith Peterson - I'm an expert IT marketing professional with over 10 years of experience in various Digital Marketing channels such as SEO (search engine optimization), SEM (search engine marketing), SMO (social media optimization), ORM (online reputation management), PPC (Google Adwords, Bing Adwords), Lead Generation, Adwords campaign management, Blogging (Corporate and Personal), and so on. Web development and design are unquestionably another of my passions. In fast-paced, high-pressure environments, I excel as an SEO Executive, SEO Analyst, SR SEO Analyst, team leader, and digital marketing strategist, efficiently managing multiple projects, prioritizing and meeting tight deadlines, analyzing and solving problems.

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