Everyone loves a good deal, don’t they?
It doesn’t matter if the product or service that you buy is cheap or expensive; we just like knowing that we got our money’s worth for it.
And you’ll be surprised to find out that the product nature is of secondary importance when it comes to purchasing; after all, how many times have we bought something just because it appeared to be having a fantastic offer?
We probably didn’t need that shady-looking aroma diffuser that was on a ‘20% discount for a limited time only!’ or that jumbo tissue paper pack that was going for ‘3 for only $9.99!’
Take me, for example. Just the other day, I entered the supermarket completely intending to only engage in casual window shopping, strictly no purchases whatsoever.
Guess what? I failed miserably and left with a handful of potato chips and assorted snacks that apparently had their prices marked down.
And that’s just one meager example out of the many price traps we fall into every single day.
Regardless of if you shop online or prefer to buy your things at the physical store, these traps are inescapable; all of them cleverly worded and tactically placed so that you won’t even know what hit you till you leave the store with your wallet just a little thinner.
But why do we often succumb to these devious pricing strategies?
The answer, it seems, is all in psychological pricing.
What Is Psychological Pricing?
According to Price Intelligently, psychological pricing is the business practice of setting prices lower than a whole number. The idea behind psychological pricing is that customers will read the slightly lowered price and actually consider it to be much lower than the price actually is.
One of the most infamous examples of psychological pricing is pricing an item at $X.99, rather than the whole number. So $19.99 will seem much cheaper to a customer as compared to $20 even though it’s really only a cent’s difference.
In fact, according to a study published in the Marketing Bulletin, more than half of prices (60%) end in the digit nine, 30% end in the digit five, and only a mere 7% ended in the digit zero.
That’s actually not surprising when you think about it, especially when you consider how susceptible we are to prices that end with the digit nine.
Of course, the above trick falls under the huge umbrella of many other subtle pricing tactics, all of which are extremely effective in getting you (the unsuspecting customer) to part with your money more easily.
Let’s take a look at five of the most used ones and see which ones you’ve personally fallen for:
Trick #1: Charm Pricing
Since we’re on the topic, let’s start off with the ‘nine’ digit example from above. This tactic actually has an official name, known as charm pricing.
In extensive studies conducted by researchers at MIT, they discovered that prices that ended with nine tended to have a higher consumer demand than those that did not.
This psychological phenomenon is mainly supported by the fact that we usually read from the left to right. Thus, when we see the ‘one’ in ‘$1.99,’ we subconsciously perceive the price to be closer to $1 than it is to $2.
The next time you shop, keep a lookout for prices that end with ‘nine.’ Make sure to remind yourself that it really isn’t as cheap as you’re making it out to be!
Trick #2: Useless Pricing
Imagine that you’re looking for a subscription to a newsletter and you come across this exciting offer below:
From the ad above, there are three subscription plans:
- Web-only subscription for $59
- Print-only subscription for $125
- Web & Print subscription for $125
Which one will you pick?
It’s quite obvious, right? Most, if not all, would have gone with option three. It’s clearly the stand-out choice among the three of them shown above.
This famous pricing strategy is what economists and marketers term as useless pricing.
As you can tell, this particular tactic stems from having entirely pointless options appear right beside the most favorable options.
These useless options add a stark contrast as compared to the favorable options in terms of value that they can deliver to the customers.
This will then make customers select the option that they want them to pick all along; which in this case turned out to be option three.
Trick #3: Anchoring
How do you get someone to buy a $10.90 set meal?
Simple. You put it beside a $59.90 set meal that you never intended to sell seriously.
This is a pricing tactic known as anchoring. Anchoring refers to the human tendency to rely heavily on the first piece of information (the “anchor”) offered when making decisions, often to a fault.
Anchoring can be found all around us. For example, some companies purposely create a premium subscription plan to go with their standard subscription plans just so customers can perceive that the standard plans are of the best value.
And it’s not just everyday people like us that buckle under the effects of anchoring — you’d be surprised at how even experts can easily fall prey to this simple trick.
In one pricing experiment conducted by researchers, professional property agents were asked to estimate the price of sample houses with the information given on the general house list prices.
What these agents did not know was that behind the scenes, the researchers manipulated the house’s list price and provided them with a series of fake high and low anchors.
The results were shocking. All the agents reportedly got influenced by the fake list price, generating numbers that were way off the correct house prices.
So the next time you are trying to make an important purchase decision, give some thought to the possible impact of anchoring on your choices.
Ask yourself: Are you giving enough consideration to all of the available information out there, or are you basing your selection on an existing ‘anchor point?’
Trick #4: Innumeracy
Here are two options:
- Buy One Get One Free
- Get 50% Off When You Buy Two Items
Which one sounds better to you?
The truth is, it doesn’t matter. Both options are exactly the same.
But curiously enough, according to a study done by researchers at the University of Minnesota, most people would prefer the first option.
This common tactic is known as innumeracy, where they take advantage of the fact that consumers are either unable to recognize or experience great mental inertia when trying to understand basic math in their everyday lives.
The innumeracy trick is usually employed in physical stores where they get you to fall for bundle deals or double discount packages.
I bet you wished you paid more attention in that arithmetic class now, huh?
Trick #5: Removing the Dollar Sign
Take a look at the menu below, and pay close attention to the pricing.
There’s nothing really out of the ordinary, right? Well, with the exception of just one thing.
Yep, the dollar sign’s missing.
This final pricing trick is usually employed for two main reasons:
- With the omission of the dollar sign, the prices become shorter to read. This subconsciously allows the customers to accept the prices more readily.
- You also remove the link to monetary value. The issue with including a dollar sign is that customers will connect the price to financial expenditure, which makes it harder for them to part with their cash. Remove the dollar sign and customers will be more willing to spend.
Take note of this trick next time you visit a restaurant, since this is usually where you’ll spot this clever ploy.
These are just the most well-known strategies that retailers employ to get us to spend more; you can be sure that there are way more out there.
But it’s completely understandable. If you’re a marketer, pricing is always a key metric that you need to pay close attention to. If anything, it’s an essential marketing tactic that can help your business boost its sales.
In other words, you need to carefully select the right numbers that will compel your audiences to purchase your products.
Look out for these subtle pricing mechanisms next time you’re out shopping. Pay special attention to how they grab you and make you want to buy them.
I guarantee that, at the very least, you’ll walk away with a wonderful lesson learned.