Psychological Pricing

Summary

This video script delves into psychological pricing strategies, which leverage consumer psychology to influence purchasing decisions. It covers charm pricing, where prices like $9.99 seem more affordable; price anchoring, setting a high initial price to make lower prices more attractive; decoy pricing, introducing a less desirable option to make another seem more valuable; scarcity and urgency pricing, creating a sense of urgency to prompt quick buying; bundling, offering multiple products at a lower price; and framing effects, presenting prices in a way that emphasizes value or savings. Real-world examples from retail giants like Walmart and e-commerce platforms illustrate these strategies in action.

Takeaways

• 💡 Psychological pricing leverages consumer behavior and psychological factors to influence purchasing decisions.
• 💰 It focuses on how the price is perceived by customers rather than solely on the product's economic value.
• 🎯 The objective is to create a perception of value and affordability, potentially increasing urgency to purchase.
• 🛒 Charm pricing, or add-on pricing, makes products seem more affordable by pricing them just below a round number (e.g., $9.99 instead of $10).
• 🏬 Retailers like Walmart use charm pricing to encourage impulse buying and make products appear more affordable.
• 🔗 Price anchoring sets an initial high price to make subsequent lower prices seem more attractive by comparison.
• 🎁 Decoy pricing introduces a third option to steer customers toward a more profitable product.
• 📦 Scarcity and urgency pricing create a sense of urgency and exclusivity, prompting quicker purchasing decisions.
• 🎫 Flash sales and limited edition products are examples of scarcity and urgency pricing in action.
• 🍔 Bundling involves offering multiple products at a single price, perceived as a savings and more convenient for consumers.
• 🖼 Framing effect in pricing shows that how information, including prices, is presented can influence customer perception and decisions.

Q & A

What is psychological pricing?

Psychological pricing is a strategy that leverages psychological factors and consumer behavior to influence purchasing decisions. It focuses on how the price is perceived by customers rather than solely on the economic value of the product.

How does psychological pricing create a perception of value?

Psychological pricing creates a perception of value by making customers believe that a product is worth the money or is more affordable. It can enhance the perceived value of a product without changing its actual value or cost.

What is the importance of psychological pricing in consumer behavior?

Psychological pricing is important in consumer behavior because it acknowledges that people often make purchasing decisions based on emotions and perceptions rather than purely logical considerations.

Can you provide an example of charm pricing?

Charm pricing, also known as add-even pricing, is when prices end with a certain digit like .99 to make them seem more affordable. For example, pricing a product at $9.99 instead of $10.

How does price anchoring work?

Price anchoring is a strategy where an initial high price is set as a reference point to make subsequent lower prices seem more attractive. It influences the customer's perception of value by comparison.

What is the psychological impact of decoy pricing?

Decoy pricing introduces a third pricing option to steer customers towards a more profitable or preferred product. It influences customer perception of value by positioning the target option as the most rational choice.

How does scarcity pricing create urgency?

Scarcity pricing emphasizes limited availability to create a sense of urgency and exclusivity, prompting quicker purchasing decisions. It triggers fear of missing out (FOMO), making customers feel they must act quickly to get the product.

What is bundling in the context of psychological pricing?

Bundling is a pricing strategy where multiple products are sold together at a single price, usually lower than the sum of the individual prices. It's perceived as offering more value for money and provides convenience.

How does the framing effect influence pricing?

The framing effect influences pricing by showing how information, including prices, is presented. The same price or product can be viewed differently depending on its framing, such as presenting a discount as a savings rather than a base price.

What are some real-world examples of psychological pricing strategies?

Real-world examples include Walmart using charm pricing to make products seem more affordable, airlines creating a sense of urgency for quick bookings, and Amazon using charm pricing during promotional events like Black Friday.

How can psychological pricing lead to a competitive advantage?

Psychological pricing can lead to a competitive advantage by making a brand's offerings more attractive compared to competitors. It can enhance the perceived value of products and drive sales, particularly when used effectively in marketing strategies.

Outlines

00:00

💡 Psychological Pricing Explained

Psychological pricing is a strategy that uses psychological factors to influence consumer behavior and purchasing decisions. It focuses on how prices are perceived rather than their actual economic value. The aim is to create a perception of value and affordability. For example, pricing a product at $9.99 instead of $10 can make it seem more affordable. Psychological pricing can enhance the perceived value of a product without changing its cost and can provide a competitive advantage by making offerings more attractive compared to competitors. Industries like retail and hospitality use this strategy, with examples including Walmart's pricing and hotels and airlines creating a sense of urgency for quick bookings.

05:02

🌟 Charm Pricing: The Magic of 'Add Even' Pricing

Charm pricing, also known as 'add even' pricing, is a tactic where prices end with a specific digit like 9 or 5 to make them seem more affordable. This strategy plays on consumer habits, conditioning them to view prices ending in 99 as better deals. Studies show that consumers are more likely to purchase items priced at $19.99 than those priced at $20.00, despite the minimal difference. Charm pricing is widely used in retail, especially in discount stores, online marketplaces, and supermarkets. Case studies include retail giants like Walmart and e-commerce platforms such as Amazon, which use charm pricing to drive sales, especially during promotional events like Black Friday.

10:06

🎯 Price Anchoring: Setting the Reference Point

Price anchoring is a strategy where an initial high price is set as a reference point to make subsequent lower prices seem more attractive. This 'anchor' price influences customer perceptions of value, making other prices appear more reasonable by comparison. The psychological impact includes a perceived deal, where customers believe they are getting a better deal when the current price is lower than the anchor price. Applications of price anchoring include discounts and sales, where retailers show the original price alongside the discounted price, and premium product lines, where a high-priced version of a product makes the standard version seem more affordable.

15:08

🍿 Decoy Pricing: Steering Customers Toward the Best Value

Decoy pricing involves introducing a third pricing option, known as the decoy, to steer customers toward a more profitable or preferred product. The decoy option is usually priced higher to make the target option appear as the best value. Psychologically, this influences customer perception of value by positioning the target option as the most rational choice and can increase sales. Implementations include three-tier pricing, such as in movie theaters offering small, medium, and large popcorn sizes, where the medium size seems like the best deal. Decoy pricing is also seen in restaurant menu designs and subscription services, where a standard plan is positioned as a decoy to make a premium plan seem more appealing.

🏃‍♂️ Scarcity and Urgency Pricing: Creating a Sense of Urge

Scarcity pricing emphasizes the limited availability of a product to create a sense of urgency and exclusivity, prompting quicker purchasing decisions. Urgency pricing, similar to scarcity pricing, leverages time-limited offers to encourage immediate purchases. The psychological impact includes fear of missing out (FOMO), which makes customers feel they must act quickly to avoid missing a valuable opportunity. Limited edition products and event tickets are examples where scarcity enhances perceived value. Applications include flash sales by online retailers and limited edition releases by brands like Nike, which capitalize on scarcity and high demand.

🍔 Bundling and Psychological Pricing: The Power of Packages

Bundling is a pricing strategy where multiple products are offered together at a single price, which is usually lower than the sum of the individual prices. The psychological impact includes perceived savings and convenience, as customers see bundles as more value for money and appreciate the simplicity of decision-making. Types of bundling include pure bundling, where products are only available as part of a bundle, and mix bundling, where customers can choose to buy the bundle or individual products separately. Bundling can increase sales volume and introduce customers to new or complementary products.

🖼️ Framing Effect in Pricing: How Presentation Influences Perception

The framing effect in pricing refers to how information, including prices, is presented and can influence customer perception and decisions. The same price or product can be viewed differently depending on its framing. Psychological impacts include positive and negative framing, where a discount framed as 'save $10' can be more effective than the same price framed as 'base price $50 after $10 discount'. Framing techniques highlight relative value or savings to influence customer choices. Applications in marketing include price comparisons, where retailers display regular and discounted prices to emphasize savings, and subscription services like Netflix or Spotify, which use monthly or yearly pricing framing to encourage long-term commitments by highlighting savings.

Keywords

💡Psychological Pricing

Psychological pricing is a strategy that uses psychological factors to influence consumer behavior and purchasing decisions. It focuses on how prices are perceived by customers rather than the actual economic value of a product. In the video, psychological pricing is discussed as a method to create a perception of value and affordability, which can enhance the attractiveness of a product without changing its actual cost. For instance, the script mentions that psychological pricing can make customers feel that a product is more affordable, thereby increasing the likelihood of a purchase.

💡Perceived Value

Perceived value refers to a customer's perception of the worth of a product or service in relation to its price. The video emphasizes that psychological pricing can enhance the perceived value of a product without altering its actual value or cost. An example from the script is the use of charm pricing, where a product priced at $9.99 is perceived to be a better deal than one priced at $10, even though the difference is negligible.

💡Affordability

Affordability in the context of the video relates to the psychological perception of a product's price being within a consumer's budget. The script uses the term to explain how psychological pricing strategies, such as charm pricing, can make products seem more affordable, thus influencing purchasing decisions. For example, pricing a product at $9.99 instead of $10 can create a perception of affordability.

💡Charm Pricing

Charm pricing, also known as add-even pricing, is a specific type of psychological pricing where prices end in a certain digit, typically 9, to make them seem more affordable. The video describes charm pricing as a way to condition consumers to view prices ending in 99 as better deals. Walmart is given as an example of a retailer that extensively uses charm pricing to make products appear more affordable.

💡Price Anchoring

Price anchoring is a strategy where an initial high price is set to make subsequent lower prices seem more attractive by comparison. The video explains that this technique sets a reference point in the customer's mind, influencing their perception of value. An example mentioned is car dealerships displaying a fully loaded model at a high price to make the base model seem like a better deal.

💡Decoy Pricing

Decoy pricing involves introducing a third pricing option, known as the decoy, to steer customers toward a more profitable or preferred product. The video describes how the decoy option is usually priced higher to make the target option appear as the best value. An example given is a movie theater offering small, medium, and large popcorn sizes, where the medium size is the decoy that makes the large size seem like a better deal.

💡Scarcity Pricing

Scarcity pricing is a strategy that emphasizes the limited availability of a product to create a sense of urgency and exclusivity, prompting quicker purchasing decisions. The video mentions that this strategy can trigger a fear of missing out (FOMO), increasing the perceived value of products that are scarce or available for a limited time. Limited edition products, like Nike sneakers, are cited as an example.

💡Urgency Pricing

Urgency pricing leverages time-limited offers to create a sense of urgency and encourage immediate purchases. The video relates this strategy to scarcity pricing but emphasizes the time constraint aspect, such as sales ending in a certain number of hours. An example is Amazon's lightning deals, where discounts are available for a limited time or until stocks run out.

💡Bundle Pricing

Bundle pricing is a strategy where multiple products are offered together at a single price, which is typically lower than the sum of the individual products' prices. The video discusses how this strategy can create a perception of savings and convenience for customers. An example is fast food combos, where customers can buy a meal deal that includes a burger, fries, and a drink at a discounted price compared to buying each item separately.

💡Framing Effect

The framing effect in pricing refers to how information, including prices, is presented and can influence customer perception and decisions. The video explains that the same price or product can be viewed differently depending on how it's framed. For instance, presenting a price as a discount ('save $10') can be more effective than presenting it as a base price with a reduction ('was $50, now $40').

Highlights

Psychological pricing leverages consumer behavior to influence purchasing decisions.

The strategy focuses on how the price is perceived by customers rather than the product's economic value.

Psychological pricing aims to create a perception of value and affordability.

Consumers often make decisions based on emotions and perceptions rather than purely logical considerations.

Retailers like Walmart use charm pricing to make products seem more affordable.

Charm pricing involves setting prices just below round numbers, like $9.99 instead of $10.

Studies show consumers are more likely to purchase products priced at $19.99 than those priced at $20.

Price anchoring sets an initial high price to make subsequent lower prices seem more attractive.

Decoy pricing introduces a third option to steer customers toward a more profitable product.

Scarcity pricing emphasizes limited availability to create urgency and exclusivity.

Urgency pricing creates a sense of urgency encouraging immediate purchases.

Bundle pricing offers multiple products together at a lower price than buying them individually.

The framing effect in pricing shows how information presentation can influence customer perception.

Discount framing, such as 'save $10', can be more effective than presenting the base price.

Relative value framing, like 'buy one get one free', can influence customer choices.

Bundle framing presents offers as special deals to increase perceived value.

Price comparisons highlight savings by showing the original price crossed out next to the sale price.

Transcripts

one and Welcome to our topic which is we

will focus on psychological

pricing so first Let's talk about what

is psychological pricing so when we talk

about this term basically This is a

strategy that leverages the

psychological factors and Consumer

behavior to influence purchasing

decision so dito class no is parang Uh

It's a way for for the customers to have

this kind of

um thinking that a product is more

affordable using the Uh add number or

using the psychological way of doing the

pricing sabi dito it doesn't focus

solely on economic value of the product

But rather on how the price is perceived

by

customers So ano bang objective nito

Syempre no ah dito ay mag-create tayo ng

perception nung value na worth the money

yung ah

yung product naon Syempre It Could also

be a sense of affordability na mura yung

product naon compared to the other

competitors at pwed in terms of urgency

na ay kahit hindi ko pa to Talagang

kailangan pero mapapabili ka dahil

mare-realize mo na kailangan mo na

talaga So ano bang importansya ng

psychological pricing pagdating sa

Consumer behavior sabi dito people don't

always make purchasing decision based on

logical or rational consideration which

is true na hindi naman tayo masyadong

minsan nag-iisip if this is really an

important thing or this is just a want

noo but mostly we focus on our Emotions

and perceptions which play a significant

role so of course we already talk about

the for per value but basically ito yung

psychological pricing that can enhance

the perceived value of Uh product

without changing its actual value or

cost and also It Could lead to

competitive advantage kasi agag

gumagamit ka ng psychological pricing ah

nakaka-date siya ng brand and you can

make your offerings more attractive

rather than the

competitors so There are some industry

examples first is in the retail store in

Walmart of course this use psychological

pricing to make products seem more

affordable example

9.99 instead of

$10 in terms of the hospitality hotel

and Airlines often use psychological

pricing to create a sense of urgency or

scarcity encouraging quick

bookings Now let's focus on the what we

call charm pricing

so first is Ano ba ung charm pricing so

ito yung tinatawag nating add even

pricing no So iniinit yung pag

ah

pagpa-practice kung 9.99 but Of course

it's just a one ah I mean 1

difference So what is the psychological

impact number one is the perce

affordability Dahil dito ay parang naive

ng customers na nasa lower Price range

no Like for example the internet

sometimes are price 1499 but if we're

going to Look at it It's already 1,500

then Consumer habit no consumers are

conditioned to view prices ending in 99

or as bargs or better deals so pag may

mga point daw na ganyan parang it's a

better deal for

customers in terms of effectiveness

there are Consumer perception and the

studies have shown that consumers are

more likely to purchase products price

at

19.99 rather than those PR

at despite the negligible difference So

kahit na parehas lang sila ng quality

but when you price your product like

this one then it could be more

salable and of course it is being

widespread use Okay the pricing strategy

is in retail especially in discount

stores online marketplaces and

supermarkets

so There are some case study here Where

where in ril giants no like the Walmart

is targeting use charm pricing

extensively to make their products

appear more affordable and to encourage

impulse

buying and in the e-commerce no only

retailers like Amazon use charm pricing

on many products to drive sales

particularly during the promotional

events like the black Friday so

kitang-kita natin sa mga retail Giants

and even e-commerce gamit na gamit ang

add even pricing or charm

pricing next is the what we call price

anoring so first let's Define what is

price anchoring ito Iyung strategy where

an initial high price the anchor is set

to make subsequent lower prices seem

more attractive the ancor price sets a

reference point in the customers mind

and making other prices appear more

reasonable by comparison so dito is Yun

nga no parang nagse-set tayo ng

different prices kung saan pwedeng yung

isang price no could be

um assume or can be um perceived by the

customers as a more a more worth price

than the

others so ano ba yung psychological

impact nito first is the perceived Deal

Believe they are getting better deal

when the current price is lower than the

ancor price

definitely and of course there is a

value perception na yung anchor price

can influence How much value customers

perceive in the product so dahil nga do

sa isang anchor no na price Parang mas

nabibigyan ng emphasis yung isang price

of the

product So what is the what are the

applications in pricing first is in

terms of discounts and sales So yung

retailers often Show the original price

along the discounted Price ' ba using

the original price as the anchor na ito

yyung original price ta's ito Iyung

discounted price So parang ikaw once you

see that no You're you're getting worth

your

money and of course there is what we

call premium product lines no' companies

may introduce a high price premium

version of a product to make the

standard version appear more affordable

so minsan no ah nagpa-iyak

the

$99 price seem to like a great

deal in the automotive sales there are

car dealership open Display a ful load

Fully Loaded model with all features at

a high price to make the base model seem

like a

baring next is the what we call decoy

pricing or the what we call decoy effect

so Ano nga ba ang decoy pricing it is

strategy involves introducing a third

pricing option which is the decoy that

is intended to steer customers toward a

particular product that is more

profitable or preferred by the seller

the decoy option is usually pric to make

the target option appear as the best

value so dito we can see na may mga

decoy na option kaga may option one

option two and option 3 and normally the

option two is becoming the

deco Ano ba yung psychological impact

nito first is the choice architecture so

the deco influences customer perception

of value by positioning the target

option as the most rational

choice another one is increase sales

because the the customers are being

guided by the dec pricing and of course

it it sends a message of a more

profitable option

so in terms of implementation there are

three tire pricing so nagoffer ng three

options the low medium which is the

Target and High where the medium option

provides the best perceived value or

possible din naman naung

medium Siya naman yung parang nagiging

Dey do sa high k Saan onung difference

so ang kukun ng customer is yung high

example is a movie theater might offer

small popcorn for $ medium for 6.5 and

large for 7 the decoy medium Makes The

Large perform seem like the best

deal of course there are also menu

design which is restaurants often used

de pricing on menus by placing an

expensive dish near a slightly cheaper

but still premium option to make the

latter more appealing

so these are some some of the real world

examples in the subscription services a

streaming service might offer three

plans basic for $ standard for 0 and

premium for $ the standard PL is the

decoy making the premium s like a better

deal so pwedeng ang maging decoy is yung

midle which ang target naman ay yung

maka premium tayo

then We also have this what we called

price bundle wherein the software

company might offer a basic version for

$50 a standard version for $100 and

delux version for

$105 so the minimal price difference

between standard and deluxe makes the

deluxe version more

appealing so let's proceed with scarcity

and urgency pricing so first noo let's

define scarcity

so dito is it is a pricing strategy

where limited availability of a product

is emphasized to create a sense of

urgency and exclusivity prompting a

quicker purchasing decision so of course

we all know p mga limited stocks lang or

limited offer ay parang nagkakaroon tayo

ng sense of urgency na bilhin yung

product so urgency pricing similar to

scarcity pricing urgency pricing

leverages timely limited eff to create a

sense of urgency encouraging immediate

purchase Ano ba Iyung psychological

impact nito first is the fear of missing

out or the what we call fomo which is

the scarcity and urgency Trigger fomo

making customers feel that they Miss out

on valuable opportunity if they don't

act

quickly example of which is only two

items left in stock or sale ends in 24

hour

this increases the perceive urgency

another one is increase in perceive

value products that are scars or

available for a limited time are often

perceived as more

valuable example of which is the limited

edition products are often price higher

because their scarcity enhances their

perceive

value of course What is the application

in marketing of course may Tay tinatawag

na flash seals kung saan yung mga online

retailers rather they use this flash

seals na may mga limited discount for a

limited time

offer and example of which is the Amazon

lighting deals Where discounts are

available available rather for a limited

time or until stock Run runs

outs and then We also have some limited

edition kung saan yung mga brands

nag-create sila ng mga limited edition

para sa collection to capitalize on

scar example of which is the Nike so

ginagawa nila ito and they releases

rather limited edition sneakers and sell

out quickly due to high demand and

limited

supply so real world examples is the

event ticket So yung mga ticket and

platforms often Show how many tickets

are left at a certain price point and

encouraging customers to buy immediate

meron din yung mga luxury brands no yung

mga high-end fashion brands

nagre-release sila ng mga limited number

of items kung saan ito nagda-drive ng

demand and allowing them to charge

premium

prices next is the bundling and

psychological pricing so banding is a

pricing strategy where multiple products

all sort together as a price or as a

package r at a single price open lower

than the sum of the individual prices so

normally here in the Philippines Of

course the use of bundle pricing are

being used by the food industry or even

the fast food

ch So what is the psychological impact

of this number one is the perce savings

syempre the customers nace yung bundle

as more value for

money another one is convenience of

course No it simplifies this dec making

because nand na lahat nung kailangan mo

you don't need to buy one at a time So

you just need to buy the

bundle and there are types of banding

first is the pure banding wherein

products are only available as part of a

bandle example of which is Cable TV

packages that include multiple channels

for a single

price next is the mix banding so

customer can choose to buy the bundle or

individual product

separately example of which is the

fastfood

combos and what is the effectiveness of

bonding so dito is nagkakaroon tayo ng

cross selling opportunities So yung

bonding allows companies to introduce

customers to new or even complementary

products and example of which is

software companies open bundle mean

products with additional to or

services and definitely No it will

increase sales volume because bundles

can encourage customers to buy more than

they initially

intended example of which is cosmetic

brand band the skin care products

together Increasing the overall purchase

value Now let's proceed with the last

part which is the framing effect in

pricing so pag sinabi ating framing

effect it is the way information

including prices is presented Uh can

influence customer perception and

decisions the same price or product can

be viewed differently depending on how

it's

Framed So what is the psychological

impact you have this positive and

negative pring so the price prame as

discount save $10 can be more effective

than the same price frame as base price

50 Uh

$50 after 10 ah $

[Musika]

discount next is relative value Dito

naman we are presenting option in a way

that highlights the relative value or

savings can influence customer

choices examples of framing Techniques

is the what we call discount pring buy

one get one free is often more appealing

than the per When you get when you buy

two even though the toal financial

outcome is the

same examples is retailers often

highlight the amount saved like save $50

rather than the final price to emphasize

value next is the bundle pricing bundle

framing rather bundles are can be frame

as a special offer or limited time deal

to increase per

value example of which is get $150 worth

of products for just

$99 makes the bundle appear as

significant value

proposition So what is the applications

in Marketing so we have this price

comparisons wherein retailers often

display the regular price alongside the

discounted price to emphasize the

deal example of which is online source

often Show the original price increase

cross rather Show the original price

cross out next to the sale price to

highlight

savings so there are also strategies

like subscription services wherein

services like Netflix or Spotify use

monthly or yearly pricing framing to

encourage customers to for to off for

the longterm commitments by highlighting

the savings kung saan pag yearly daw mas

magiging

kung i-compute natin kumpara sa month