How to Boost Retail Sales With Psychological Pricing
There are two pricing strategies that are particularly helpful for online retailers: psychological pricing and comparison pricing. They actually complement each other nicely. Psychological pricing taps into the way that our brains work to offer great deals in the eyes of the consumer. While there are many different forms of psychological pricing, they all have a common goal of incentivizing a shopper to buy.
One form of psychological pricing is called charm pricing. It features a number that you’ve seen on a lot of price tags: nine. Shoppers just can’t get enough of this number because it makes them feel like they’re getting a deal — $19.99 is less than $20, and that resonates strongly with shoppers. Even though it might not make the most sense, the numbers speak for themselves. Prices with a nine in them see a 24 percent increase in sales compared to other prices.
Not so fast, however. The charm pricing bandwagon isn't for all retailers because it can do a number on a retailer's brand value if used in the wrong way. Since a price ending in .99 can convey to a shopper that they’re getting a great deal, a luxury brand might want to steer clear and stick with whole pricing instead. However, many luxury items such as Apple products still feature several nines in them, and those sales certainly aren’t dipping. It all comes down to how you position your products and how you want their prices to be perceived.
Another way that retailers can convince shoppers to check out is by taking advantage of comparison pricing. Relative price matters just as much as the actual price. Retailers can optimize comparison pricing by having different tiers of the same product. Apple is a master of this, as it has multiple versions of the same product with different memory capacities.