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6 surprising tips on how pricing psychology will boost your sales

There are some quite persistent myths about pricing psychology:

  • The color red scares people
  • Prices that end in 99 or 95 cents work better
  • Get rid of pricing options that don’t sell

Do you think these are good ideas when it comes to price setting?

Better read on then…

Because we’ve got 6 insights for you about psychological pricing that will show you that these so-called ‘truths’ about pricing aren’t always true...

1. The small currency symbol as a pricing technique

Strange as it may seem: it’s actually a good idea to make the currency symbol smaller than the numbers in your price.

This phenomenon has been studied lots of times for restaurant menus. And we see the same effect online.

Leave out the currency symbol. It stops people from thinking about the ‘pain of paying’. They focus less on what they’re spending and more on what they’re getting.

Cornell University researchers wanted to find out which price display option made restaurant guests spend more.

  • With the dollar symbol: $20,00
  • Written out in full: twenty dollars
  • Without the dollar symbol: 20,00

The result?

The price without the dollar symbol increased turnover by an impressive 8%.

Why’s that, you ask?

Because the option without the dollar symbol reminds customers less of the ‘pain of paying’. They focus less on what they’re spending. And more on what they’re getting.

Now, this is a trick that you can easily use online. That is: if all your visitors use the same currency. Does your web shop only sell in the USA? Then you can drop the dollar sign, no problem.

It gets a bit more complicated when you’re selling to Europeans and Americans for example. Then you do need the currency symbol or your visitors might get confused.

But there’s a smart fix: make your currency sign much smaller than the actual price.

This Amazon.com example shows a small dollar sign as a price setting method.
This Amazon.com example shows a small dollar sign as a price setting method.

The great thing is: the very same pricing psychology strategy also works the other way around.

A discount or a gift for your customers? Make your pricing symbol as big as possible. 

A price psychology example that works the other way around: show the amount of money for your customers with a huge dollar sign.
A price psychology example that works the other way around: show the amount of money for your customers with a huge dollar sign.

2. Round up sale prices: yes or no?

Most online and offline shops do not round up prices. They make prices end in 99 or 95 cents on purpose. It’s a really old sales technique. And it works ridiculously well.

Why are these prices so incredibly efficient?

Because in western countries, we read from left to right. Which makes the most left placed number of a price – the one before the decimal sign – stick in our minds most.

That is why we perceive 9.99 pounds as a much better deal than 10 pounds. Even though there’s hardly any difference. And even though we know damn well that it’s a sales trick.

So everyone should use this phenomenal trick all the time, right?

Sorry: nope.

This psychological pricing technique works better for cheap products. We might not be aware of it, but we can’t be bothered with low prices very much. That’s why we often don’t even register the 99 or 95 cents at the end of a low price.

We often associate these low prices with sales. And sometimes that’s a good thing. But not always.

Because when we think in terms of ‘bargain’ and ‘cheap’, we often also think ‘low quality’.

This association was researched by Robert M. Schindler.

This is why luxury brands won’t use this 99 or 95 price trick as much as others.

An example of psychological prices in the Paul Smith online store. Round prices for a luxury product.
An example of psychological prices in the Paul Smith online store. Round prices for a luxury product.
In this example of psychological pricing strategy, Zalando aims at budget shoppers. Hello, 95 cent prices!
In this example of psychological pricing strategy, Zalando aims at budget shoppers. Hello, 95 cent prices!

3. Anchoring effect in your psychological pricing strategy

The anchoring effect is a tried and tested pricing technique that appears on numerous websites.

How does it work exactly? It’s simple, really. The first price you suggest to people affects the way they perceive the prices that follow.

If you show someone a 5,000 dollar price first, and a 1,500 dollar price after, they’ll perceive the 1,500 dollars as a bargain.

But if you suggest 100 dollars first, and then 1,500 dollars, they’ll find the 1,500 dollar price ridiculously expensive.

A classic example of this anchoring effect is Steve Jobs’ presentation of the first iPad.

If you were selling subscriptions, for example, we’d advise you to experiment with putting the most expensive option first. It will make your other subscriptions look a lot cheaper.

This Hotjar page is a good example of this price setting strategy of putting the most expensive subscription first.
This Hotjar page is a good example of this price setting strategy of putting the most expensive subscription first.

4. Decoy effect: show the option no one wants

The decoy effect is another little trick used in pricing psychology strategies.

Here, you also line up different versions of your product or service. But one of the options acts as a decoy. It is an option you know to be so unappealing that no one will ever choose it.

That decoy has 1 job: make the most expensive ‘normal’ option look better. Use this technique when you want to lure customers that normally choose the budget option to your premium offer.

There’s a famous experiment about this effect by Dan Ariely. It involved the Economist subscription page.

Subscribers were given the choice between:

  • Online subscription: $59.00
  • Print subscription: $125.00
  • Combination print and online: $125.00

No, there’s no typo there. Just read on. :-)

The 2nd option acts as a decoy while The Economist lets us compare its subscription offers.
The 2nd option acts as a decoy while The Economist lets us compare its subscription offers.

Ariely studied the reactions of 100 people to this price setting. The results:

The subscription options for The Economist: Web only is 59 dollars, Print only is 125 dollars, and 'Print and web' is 125 dollars as well. 16% gets Web only, 0% gets Print only, and 84% gets 'Print and web'.

You might find this rather stupid. Zero subscribers for the 'Print only' option: shouldn’t they just drop it then?

No, they shouldn’t.

Because this is what happens when they do: 

The subscription options for The Economist, without the decoy: Web only is 59 dollars, Print only is 125 dollars. Now 68% gets Web only, and only 32% gets Print only.

With the decoy, 84% buys the most expensive product. Without the decoy: only 32%.

Wow.

5. Prices in red: don’t they scare customers away?

In traffic, red means stop. When a teacher uses it to correct a test, it means wrong. In the stock market, it means big trouble. But in psychological price representation, you shouldn’t be afraid of using red.

Because prices in red can be effective. Especially if your clients are men

Researchers alternatively showed people an ad with a red price and an ad with a black price. Men perceived red prices as better value for money. Among women there was no difference: they paid more attention to the ad itself than to the color the price was in.

Internet giants like Booking.com or Amazon.com use this type of psychological price setting all the time.

Booking.com advertises its ‘deal of the day’ in red. Coincidence? Yeah, right.
Booking.com advertises its ‘deal of the day’ in red. Coincidence? Yeah, right.
80s heroes Hall and Oates in our little psychological pricing example. Amazon attaches a red price tag to the expensive vinyl version of the album. Whimsy? Sure…
80s heroes Hall and Oates in our little psychological pricing example. Amazon attaches a red price tag to the expensive vinyl version of the album. Whimsy? Sure…

6. Pricing psychology: size matters

The shorter your price, the cheaper it will look to your visitors.

There are some simple pricing techniques to shorten your prices.

You should do away with any 0’s after the decimal point in your price display.

Get rid of the thousands separator comma as well. And all the stuff after the comma.

  • 1,235.00 pounds > 1,235 pounds
  • 1,235 pounds > 1235 pounds

These techniques ensure people perceive your price to be shorter and also cheaper. Longer prices force our brain to process the price more. And the more we need to think, the higher we think the price is.

Again: you can turn this principle around if it suits you better. Have you got a present for your customers? Then make the price longer. It will increase the perceived value of your offer.

Walmart with a long list price and a long discount on it. It was expensive, but look how much cheaper it is now! And the new price? Shorter and therefore cheaper in our minds.
Walmart with a long list price and a long discount on it. It was expensive, but look how much cheaper it is now! And the new price? Shorter and therefore cheaper in our minds.

Will all these price display tricks work for me?

It depends.

There is no universal price formula that works for everyone. What works for you depends on a lot of elements. Like what you’re selling, who your customers are and the perception of your brand.

We can help you discover the approach that best suits your website. The approach that gives sales a boost. Get in touch if you’d like to find out more

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