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In case you did not know, utilizing psychology in pricing is a
popular stratagem, the key in how these psychological pricing tactics
work lies in the concept of perception of value, also known as price
perception or value perception.
So, what really is price perception so to speak? It is the humanly perceived images of something that they believe it is because they think it is. These perceptions of something contain a slight (or maybe large) difference compared to its true value.
Suppose I decided to give you $100, you'd think that's a fair amount of cash, but in the meanwhile you heard that I gave another person $20, you'd react thinking the $100 you got was a load of money. In another scenario, if you heard me give another person $500, you'd think that the $100 you received was very little.
What's the takeaway from this? In our minds, how we judge something in terms of its value is determined by the surrounding factors such as being able to compare your own properties with other peoples' properties.
By bringing this concept into the world of marketing, we can utilize this psychological behavior and exploit it in pricing products, potentially creating the price perception effect, which causes orders and sales to increase.
For example: making a product look cheaper can be achieved by the odd pricing strategy, which is by using odd numbers (hence its name) rather than using rounded numbers, e.g. pricing at $19.99 rather than $20.
The mathematical difference in the two values is only by 1 cent, however it's humanly perceived value appears that $19.99 is $10 cheaper than $20 because of its first digit, as we tend to read from left to right. This perception may not occur to every single person but it works to the majority of consumers worldwide. As a result, the strategy helps increase sales.
The odd pricing strategy has a mirrored version of itself that utilizes the same core principle of price perception, called prestige pricing or image pricing. The goal of this strategy is to change the perception of a product to appear expensive than it really is, which is the reversed goal of odd pricing.
Now, you might wonder why would any firm ever want to "make" their products look expensive? Doesn't that decrease sales? Amazingly, prestige pricing is proven to be effective to increase sales, however only if used properly and at the right audience.
Prestige pricing only works on high-end and luxury based products, not only does making it look expensive reinforce its brand reputation, it also expresses the generally accepted meaning of "expensive equals high quality."
Both odd pricing and prestige pricing are merely two pricing examples that focus on the concept of the perception of value, which can be harnessed for a great deal of benefits and advantages, including raising conversions, increasing sales and ultimately, making more money.
So, what really is price perception so to speak? It is the humanly perceived images of something that they believe it is because they think it is. These perceptions of something contain a slight (or maybe large) difference compared to its true value.
Suppose I decided to give you $100, you'd think that's a fair amount of cash, but in the meanwhile you heard that I gave another person $20, you'd react thinking the $100 you got was a load of money. In another scenario, if you heard me give another person $500, you'd think that the $100 you received was very little.
What's the takeaway from this? In our minds, how we judge something in terms of its value is determined by the surrounding factors such as being able to compare your own properties with other peoples' properties.
By bringing this concept into the world of marketing, we can utilize this psychological behavior and exploit it in pricing products, potentially creating the price perception effect, which causes orders and sales to increase.
For example: making a product look cheaper can be achieved by the odd pricing strategy, which is by using odd numbers (hence its name) rather than using rounded numbers, e.g. pricing at $19.99 rather than $20.
The mathematical difference in the two values is only by 1 cent, however it's humanly perceived value appears that $19.99 is $10 cheaper than $20 because of its first digit, as we tend to read from left to right. This perception may not occur to every single person but it works to the majority of consumers worldwide. As a result, the strategy helps increase sales.
The odd pricing strategy has a mirrored version of itself that utilizes the same core principle of price perception, called prestige pricing or image pricing. The goal of this strategy is to change the perception of a product to appear expensive than it really is, which is the reversed goal of odd pricing.
Now, you might wonder why would any firm ever want to "make" their products look expensive? Doesn't that decrease sales? Amazingly, prestige pricing is proven to be effective to increase sales, however only if used properly and at the right audience.
Prestige pricing only works on high-end and luxury based products, not only does making it look expensive reinforce its brand reputation, it also expresses the generally accepted meaning of "expensive equals high quality."
Both odd pricing and prestige pricing are merely two pricing examples that focus on the concept of the perception of value, which can be harnessed for a great deal of benefits and advantages, including raising conversions, increasing sales and ultimately, making more money.
Further More About Psychological Pricing:
Note that the content above acts as brief information which its entirety can be read at my psychological pricing learning center. Continue reading about price perception.
Note that the content above acts as brief information which its entirety can be read at my psychological pricing learning center. Continue reading about price perception.
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