Price Psychology

5 Stunning Examples Of Price Psychology

Exciting research in price psychology reveals the little changes a marketer can make to a price to make it psychologically more appealing. We all know that $2.99 feels like a lower price than $3.00, but that’s just one of many perceptual biases people have when it comes to prices.

Recently, Social Psych Online released a full online course called Smart Marketing with Price PsychologyIn it, you’ll learn about a ton of social psychological research on how little things make prices feel psychologically more appealing. At the end of this article, I’ll give you a special deal on the course to celebrate its launch.

In the meantime, I’m going to show you five fun studies from price psychology here on the blog (and in the accompanying YouTube video).

1. Ego Pricing

My birthday is July 14th. Do you think that makes me any more likely to buy a book that costs $14 than someone whose birthday is July 10th? The research suggests I would. In fact, I might even be more likely to buy the $14 book than a $12 one!

Our birthdays are special to us; we often choose our lucky numbers from the random day of the month on which we entered the world. All of that time we spend rehearsing our birthdate, though, may make us subtly attracted to that number even when it appears incidentally.

In one recent study, Keith Coulter and Dhruv Grewal tested the power of birthdays by seeing whether it would impact people’s purchasing decisions. They told some of the people in their study that they could buy a pasta dinner from a local restaurant at a promotional cost of $39.

They told another set of people exactly the same information, but they changed the price just slightly for each person; they included their birthdates in the price. For instance, if the person was born on December 26th, the dinner would cost $39.26. If she was born on October 8th, the dinner would cost $39.08. You get the idea.

Finally, to make sure that just adding cents to a price at all isn’t the deciding factor, they told the final set of people that the dinner cost was $39 and some amount of cents, but not their birthdate.

After everyone learned about the promotion, they were asked how likely they’d be to buy the dinner. Compared to people who just saw a $39 price tag and people who saw the price tag with a number of cents that didn’t match their birthdate, the people who saw the price with their birthdate in it were more likely to buy the dinner.

That is, it seems that just matching a price to the individual consumer can be enough to subtly increase purchase decisions.

2. The Comma Effect

$1200

$1,200

Do you think you’d be more likely to buy a $1200 computer or a $1,200 computer? If you’re a rational human being, you’d correctly recognize that I gave you the same price twice. That little comma, though, can be a powerful influence on price perception.

Another study by Keith Coulter and his colleagues had people read a list of large prices. They either included a commas (e.g., $1,858) or not (e.g., $1858). Later, everyone was asked how big the prices seemed from “small” to “large.”

On average, the versions of prices that had commas in them appeared bigger than the versions without commas. Something as simple as a tiny visual cue changed the way the price itself was perceived. So keep those commas out if you want your price to look lower.

3. The Relative Size Effect

Let’s say I want to offer a discount on one of my online courses. What’s the best way to visually display the discount to my audience? Let’s say I’m offering a course for $10 when the normal cost of the course is $50.

According to the research, I should make my sale price smaller than the retail cost like this:

discounts

The reason is that “small” font matches “low” price, and research in price psychology, which has tested whether the sale price should be visually smaller or bigger than the original price has found that this version of the discount display is best. Compared to people who see an ad with a sale price printed in large font, people who see the same ad but with a smaller font for the sale price report greater likelihood of actually buying the product.

4. Consolidated Surcharges

There’s a phenomenon in pricing psychology that you’re probably very familiar with: partitioned pricing. This is what happens when a store displays their price separate from a shipping and handling fee. This is typically a good strategy because the main price is lower if you leave the additional fees off. If you compare “$12 + $3 S&H” and “$15, shipping included,” they key number is lower with partitioned pricing.

But what if you have a few additional fees? According the research, it’s a better idea to combine those fees into a larger single fee. One study testing the effects of partitioned pricing and online sales found that a larger combined surcharge performed better than splitting it into two smaller surcharges.

5. The Descending Order Effect

In a lot of selling scenarios, people aren’t just selling a single product; they’re selling from a set of available products or services. The question is: how can we lure people to choosing a more expensive option? One way to do this is to keep an eye on the order in which you present your products.

Beer Bottles (Pixabay)In a recent study, Kwanho Suk and colleagues were allowed to take control of one bar’s beer menu. All they did was change around the order in which beers were listed. Some weeks, the beers would go from the most to the least expensive. On other weeks, they would go from the least to the most expensive. That’s all that changed.

At the end of the eight weeks, the bar shared their sales with the researchers. They sold more than 1,000 beers over those eight weeks, but when the researchers looked at which beers people were choosing, they found that it depended on the week.

On weeks when the beers were listed from most to least expensive, people tended to order more expensive bottles than on weeks when the beers were listed from least to most expensive. It seems that getting people consider more expensive options first nudges them to end up choosing a more expensive product than if they started with a cheaper option.

“But wait, there’s more!” … Price Psychology

For more insights from price psychology, check out the full online course, available now on Udemy. In 3 hours of video lectures, I cover much more than these five studies and even offer important additions to the effects covered here.

To get a special discount on the course, use this link and get it applied automatically.

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