Psychological Pricing | How Apple Uses a Psychological Pricing Strategy

Summary

The video explains how Apple, like many major companies, uses psychological pricing to make their products seem more affordable. This strategy involves pricing items just below a round number—such as £849 instead of £850—which tricks our brains into perceiving them as cheaper. This perception is rooted in how we read numbers from left to right, anchoring our minds to the first digit. While the difference is minimal, this pricing tactic influences our buying decisions. However, if customers catch on to this strategy, it can negatively affect a brand’s reputation and sales.

Takeaways

• 😀 Psychological pricing is a strategy that manipulates our perception of numbers to make products seem cheaper than they are.
• 😀 Companies price products just under round numbers (e.g., £199 instead of £200) to make them seem more affordable.
• 😀 Our brains anchor prices based on the first number we see when reading from left to right, influencing how we perceive the cost.
• 😀 A small difference, such as £1, can make a price seem much lower than a rounded price (e.g., £199 feels closer to £100 than £200).
• 😀 Psychological pricing is widely used by many major companies, including Apple, showing its effectiveness in influencing consumer behavior.
• 😀 The iPhone 14's price of £849 is intentionally set to appear closer to £800, thus seeming more affordable than £900.
• 😀 This pricing strategy plays on subconscious perceptions to make consumers feel like they are getting a better deal.
• 😀 Even though many consumers are aware of psychological pricing, it still remains effective for businesses.
• 😀 If psychological pricing is used improperly, customers may feel deceived, which could negatively impact brand image and sales.
• 😀 Companies use psychological pricing to increase product sales, relying on consumer perceptions to drive purchasing decisions.

Q & A

What is psychological pricing?

Psychological pricing is a pricing strategy that influences how consumers perceive the cost of a product. It involves setting prices just below round numbers to make products seem cheaper than they are, such as pricing an item at £199 instead of £200.

Why does psychological pricing work?

Psychological pricing works because of how our brains process numbers. When we see a price like £199, we subconsciously anchor the price to the first number on the left (the 1 in this case), making it feel closer to £100 than to £200.

How does psychological pricing affect our perception of value?

Psychological pricing skews our perception by making a product seem cheaper than it actually is. Our brains are tricked into focusing on the first number, causing us to view a price like £199 as much cheaper than £200, even though the difference is minimal.

What is the strategy behind pricing an iPhone at £849 instead of £850?

By pricing the iPhone at £849 instead of £850, Apple uses psychological pricing to make the product seem closer to £800 than £900. This anchors the price in our minds as being cheaper, even though the difference is only £1.

What are some examples of businesses using psychological pricing?

Many large businesses, including Apple, use psychological pricing. For instance, Apple prices the iPhone 14 at £849, which is psychologically perceived as closer to £800 than £900, influencing consumer decisions.

How does psychological pricing relate to the left-to-right reading pattern?

Psychological pricing leverages the way we read numbers from left to right. The first number we see, such as the 1 in £199, shapes our perception of the price, making it seem closer to £100 rather than £200.

Can customers recognize psychological pricing tactics?

Yes, many customers can recognize psychological pricing tactics, and although they may not be tricked by it, they understand that the strategy is designed to influence their perception of value.

What could happen if psychological pricing is overused or misused?

If psychological pricing is misused, customers may feel like they are being tricked, which could result in negative brand perceptions and reduced sales for the company.

Why do companies use psychological pricing despite its obvious nature?

Companies use psychological pricing because it has been shown to work. Despite its obvious nature, it remains an effective strategy to influence purchasing decisions and boost sales.

What role does the brain's subconscious perception play in psychological pricing?

The brain's subconscious perception plays a crucial role in psychological pricing. It focuses on the left-most number in a price, leading to a misperception of value, as seen with prices like £199, which seem closer to £100 rather than £200.