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What Is Meant by Psychological Pricing?

Psychological pricing is a pricing and sales strategy based upon the belief that certain prices will influence a potential customer in one or more ways. Psychological pricing is designed to help remove resistance to making a purchase, so the company can make more sales.

Large companies like Amazon use psychological pricing to drive sales. But small businesses can use it too, once they master the basic concepts.

There are a number of influencing factors that can help you sell well to your target audience. Here are a few of the most important ones to keep in mind.

Nines and Sevens

$99.99 or $99.97 is actually psychologically more enticing and acceptable than $100. For some reason, the human mind hones in on the first 9, not equating it with the higher price of $100, which is more accurate.

The Appearance of Discounting

Many people will look for a low price or a big discount. Listing a much higher price and then giving a discount can attract the bargain hunting shopper.


Coupons can also attract the bargain hunter. Itís a win both for the customer and you as the business owner, because you only have to offer the big discount to the people who use the coupon, not to everyone who comes to your site.

Price Alignment

A coupon is useful too because you donít want to price your product too low in the marketplace, or else consumers might think it is inferior or that there is something wrong with it. Your prices need to be roughly in line with the top products that are already selling in your niche or industry.

Price versus Value

Not everyone will buy the lowest priced item. But if you are going to price yourself higher than the other items in the marketplace, you need to have a clear value proposition as to why your item is better.

If we think of Nissan, Toyota and Lexus, they are all made by the same company, and a car is essentially a metal box with wheels and an engine designed to get you from A to B. But the Lexus commands a higher price tag. It conveys quality, style and comfort. It can also be a reflection of success because a person is able to afford it.


Bundling helps boost the per-customer value while still permitting them to believe that they are getting a great deal. Amazon does this all the time with their bundling suggestions underneath the main product on each sales page.

A bundle can save money if the total price adds up to considerably less than all the items priced individually, and the prices on the items are competitive. However, this is not always the case.

With HP ink cartridges, for example, a bundle of all the colors needed would be good value if the total is considerably less than what you would pay separately for four cartridges, and if the overall price is cheaper than in most stores. Comparison shopping could help the consumer determine if it were the best deal. However, consumers also buy bundles for the sake of convenience. It takes the guesswork out of the issue of what they really need and psychologically, they are happy because they feel they have gotten a bargain.

If you are a small business owner, take the time to master the various psychological pricing strategies and see what a difference they can make to your bottom line.


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