Psychological Pricing – A Brief Overview


You must have seen hoardings that urge customers to try out a product or service at "just $199 ". But, why it is 199 and not 200? How does a business benefit by pricing its products or services in such a way? Before exploring answers to these questions, it is important to know what this pricing strategy is called. This article will make you aware of all these aspects. Take a look at the following.

The practice of fixing a product’s price a little lower than a rounded number is called psychological pricing. This miscellaneous pricing strategy is incorporated by businesses with the hope that consumers will not round up the price and subsequently, consider the price amount lower than the rounded number (although it is just a dollar lower). Many consumers take heed of the cost of an item from the left-most digit of the price amount and do not pay attention to the last digits. Psychological pricing finds basis on this notion.


An example of psychological pricing can be a company that has created a protein supplement. Then, the company finds out that there are numerous same products costing 1,999 dollars and some competitors are even offering the product at a price amount of 1,500 dollars within the price band of 1,000 to 1,999 dollars. So, the company assigns a price amount of 1,999 dollars to its new protein supplement. With this pricing strategy, it can stay in competition and position itself in the price band of 1,000 to 1,999 dollars.

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