Psychological Pricing
Summary
TLDRThis 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
- π‘ Psychological pricing leverages consumer behavior and psychological factors to influence purchasing decisions.
- π° It focuses on how the price is perceived by customers rather than solely on the product's economic value.
- π― The objective is to create a perception of value and affordability, potentially increasing urgency to purchase.
- π 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).
- π¬ Retailers like Walmart use charm pricing to encourage impulse buying and make products appear more affordable.
- π Price anchoring sets an initial high price to make subsequent lower prices seem more attractive by comparison.
- π Decoy pricing introduces a third option to steer customers toward a more profitable product.
- π¦ Scarcity and urgency pricing create a sense of urgency and exclusivity, prompting quicker purchasing decisions.
- π« Flash sales and limited edition products are examples of scarcity and urgency pricing in action.
- π Bundling involves offering multiple products at a single price, perceived as a savings and more convenient for consumers.
- πΌ 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
π‘ 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.
π 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.
π― 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.
πΏ 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.
πββοΈ 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.
π 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.
πΌοΈ 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.
Mindmap
Keywords
π‘Psychological Pricing
π‘Perceived Value
π‘Affordability
π‘Charm Pricing
π‘Price Anchoring
π‘Decoy Pricing
π‘Scarcity Pricing
π‘Urgency Pricing
π‘Bundle Pricing
π‘Framing Effect
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
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