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.
Apple’s strategy is effective for three different reasons. First, shoppers with a lower budget will be steered toward the cheaper option to get the product they want at a price they can afford. Second, the price of the cheapest option is validated by the fact that there are more expensive versions available. Third, shoppers will be able to see the value of the higher-priced versions, as they come with more memory or other capabilities for a relatively low additional cost.
Getting into a shopper’s head is the first step in getting them to convert. After all, a little psychological pricing can go a long way. It’s just a matter of proving to the shopper that the price and timing are right.
Angelica Valentine is the content marketing manager at Wiser, a price intelligence engine for brands and retailers.
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