The price has a psychological value. Buyers will buy a high-priced product because they believe that the high price is a good indicator of value. Your perception is not based on reality, it is psychologically based, therefore buyer behavior is affected by more than just the product and the tangible price.

Interestingly, as buyers investigate product attributes more or the company promotes product characteristics more effectively, that product knowledge (‘familiarity breeds contempt’) allows buyers to make a more rational purchasing decision, rather than psychological, and for buyers, price movements. down the value scale.

One use of psychological pricing is in final price numbers. Buyers believe that prices that end in unequal numbers, rather than even numbers (such as $ 9.99, $ 199,999, etc.) are a better deal or a better price than even numbers (such as $ 10 or $ 200,000 ). If the price of the products must be in a price ‘band’ (such as online auctions, cars or other sales listings), if the list price is in the odd range, say $ 199,000, it will appear in a price band lower than the $ 200,000 list and will look like a better value. The challenge with this strategy is that products that end in an odd number are also often perceived as having less value. Make sure you choose the right price and the right strategy for your specific product or service.

Another use of psychological prices is the reference price. The reference price is when buyers have a psychological response to price that reflects how they view the relationship of a price to a specific product. A company could take advantage of reference prices and position its product among high-value or luxury items to imply that its product belongs to the same category. Be careful with that positioning strategy, it can backfire if buyers feel that your product doesn’t really belong in that category.

For psychological pricing to be an effective pricing strategy, the product must have some characteristics that appeal to an ego-sensitive buyer. For example, luxury items are attractive to ego-sensitive shoppers. Premium recreational goods, such as boats, are attractive to ego-sensitive buyers. Your strategic planning model must ensure that the pricing strategy selected for your product or service is the best price.

Make sure your pricing strategy fits your product and market by testing the price before publishing to your entire target market. Also consider the impact that the other elements of the marketing mix have on your price: if the product is suitable for a psychological pricing strategy, if the promotional program is in tune with the pricing strategy, and if the location or distribution channel are they in balance with the price (i.e. should shipping the product cost no more than the product itself)?