June 30, 2022

If you want to improve your business’s bottom line, you may consider a psychological pricing strategy. This type of pricing can be effective in getting customers to purchase your product or service. However, there are also some disadvantages that you should consider before implementing this type of pricing. In this blog post, we’ll take a look at the psychological pricing strategy advantages and disadvantages so you can make an informed decision for your business.

Psychological Pricing Strategy Advantages and Disadvantages

Before we discuss the psychological pricing strategy advantages and disadvantages, let’s first define these terms to ensure that we are on the same page.

Psychological Pricing

A psychological pricing model is a marketing strategy that utilizes low prices to trick consumers into thinking they’re getting a good deal. This, in turn, may encourage the consumer to purchase the product.

We hypothesize that people focus on the first number on the left and ignore the numbers to the right.

This pricing strategy will trick the customer into thinking they’re paying less than they are. This tactic will convince customers to pay more.

There are many forms of psychological pricing, which we’ll discuss below.

1. Artificial time limitations

Sellers often use “limited time offers” to encourage customers to act quickly. For example, they may offer a “one-day-only” sale or “the first 50 people” to receive 50% off.

This tactic pressures customers to act quickly, or else they’ll miss out on the deal.

The salespeople keep changing price promotions one after the other.

2. Charm Pricing

This method may help reduce the left number by one digit, and it could make the last digit become the number “9.” You might see this often in stores.

For instance, prices like $ 4.99, $ 0.99, and so on will be perceived differently than $ 5.00. Our brains will perceive $ 5.00 as a more significant amount than $ 4.99.

Most customers will perceive the $4.99 as $4 instead of $5.

It applies to more expensive products where the prices will be $999, $499, and $900. The intent is to fool customers into thinking the price is $400.

Research conducted in 2005 shows that people pay more attention to the correct digits of a number, ignoring those on the left.

3. The innumerate strategy- BOGO

People are attracted to the idea of getting a free product if they purchase the first item at the total price. The “buy one get one” (BOGO) strategy is attractive because it is the same as offering 50% off. If the item were sold at a 50% discount, it would be less attractive to customers.

-Buy one get one free offers-50% off discounts-BOGO (buy one get one) deals.

There are various forms of innumerate pricing and discounts, such as getting 10% off when you buy 2 or more or receiving a gift with your purchase.

4. Price Appearance

The price appearance strategy uses a trick to show the price of your product in a smaller font size, which attracts buyers’ attention less than if it were in a larger one. The buyer will see $15, not $15.00.

The 0 will be removed as it makes it look like the price is higher than it is.

Consumers will perceive the shorter price tag as more affordable than the whole price.

Some sellers try to make their products look cheaper by removing the “$” sign from the price. This, combined with rounding up to the nearest whole number, makes the product appear less expensive than it is.

5. Prestige pricing

Prestige pricing model is the opposite of charm pricing and will round up to higher prices, e.g., $100 instead of $99.99.

They feel that this pricing model will convince clients to buy their products quicker.

Pricing the item at $ 50.00 instead of $ 48.99 will allow us to process our thoughts faster.

6. Comparative pricing

This strategy involves putting similar products next to each other, with one having a high price and the other being significantly cheaper. This will help you see how much value you’re getting for your money.

This price is usually seen when similar items are placed in the same aisle.

7. Use visual highlights

Sellers often use big fonts, bright colors, and eye-catching pictures to catch your attention.

The old and new prices are placed side-by-side to show customers the extent of the discount. This makes the price appear more attractive and encourages customers to purchase the item.

8. Partitioned pricing

By breaking down the price of a product into several smaller parts, you can show that you’re offering your customers an excellent deal. This selling style is more effective at convincing people to buy than traditional methods.

Shipping and handling are typically charged separately from a product’s price. This lets the customer see the item’s total price, including the shipping, before buying.

Why is this an effective strategy?

People aren’t very good at math. It’s unlikely that the typical customer will do the math required to add all the components up.

The base price of the product can have a significant impact on sales.

Psychological Pricing Advantages & Disadvantages

Psychological pricing Advantages

1. It can provide a high return for a business’s investments.

Psychological pricing is a way to increase the price of an item once it has been sold. This is when the product is first launched. It is possible to charge a higher price if there is high demand. Your early adopters can also be used as testers to help you refine the product. This will allow you to get a higher return on your initial investment.

2. It could discourage competitors from entering your market.

Another option for psychological pricing is “penetration pricing.” It targets consumers who are sensitive about costs in specific market segments. Engaging these consumers with a targeted, lower price will create an emotional response that encourages them to purchase. This eliminates the need to control costs and may even make it more difficult for competitors to enter the market.

3. It allows you to be transparent about all costs.

If you have ever shopped online for anything, you will have seen a psychological pricing strategy called “partitioned Pricing” for the products and services. This pricing strategy will list all costs that a customer will incur, usually at the checkout.

There will be separate shipping, handling, administrative fees, and sales tax charges. You will also see the initial price of the item. This information lets customers see if they are getting a good deal.

4. It makes it easier for consumers to make decisions.

Consumers are often cost-conscious, and the price is a significant factor in their decision-making process. Anchor pricing allows you to encourage customers to consider a lower-priced item if it is more affordable than a comparable product. This allows you to increase sales of specific products and makes customers feel like they got a good deal.

5. It increases attention to a product by highlighting its actual cost.

Charm pricing can influence up to 70% of products sold in stores. It is also known as “.99 pricing,” allowing businesses to market products with a number that is just below what they want. It is not as effective today as it was, but minor adjustments can significantly impact it. To make a more significant impact, some companies use 97 or 95 pricing instead of 99.

6. It has multiple ways to get customer attention.

Charm pricing is the most popular strategy in this marketing category today, but there are other psychological pricing options. This category includes any pricing strategy that encourages customers to see more and add value when purchasing multiple items.

Knowing your customers’ preferences will help you create a pricing strategy that will grab their attention and increase your chances of closing a deal. Even fast-food restaurants use a psychological pricing strategy called “bundling” for their combo meals.


1. To be effective, it requires constant demand.

Psychological pricing works only if the demand for products and services is consistent. For example, if you lower prices over time, consumers may wait to upgrade before purchasing the next item. Many psychological pricing strategies are not viable over time because consumers eventually realize that perceived deals are not as strong.

2. It can lead to long-term pricing expectations

To encourage sales, you can use psychological pricing to ensure that consumers expect to see the lowest price possible. Customers who look for the lowest price are more loyal to the company than to the company. They will go to a competitor’s product if they see a price they don’t like.

Worse, a business that appears to be able to offer cheap pricing may cause questions about the brand’s quality and stop potential customers from signing up.

3. It could drive your customers away.

This category has pricing strategies that lower prices, even if only by a penny or an equivalent currency. Some people use tricks that make it appear you hide the actual cost. If you know that a shirt costs $10 and you have the means to pay it, you won’t be surprised if you add $10 shipping costs at checkout. T

his will make your customer abandon their card. It’s possible that your customers will not like the idea of being bombarded with hidden costs.

4. It could damage your brand’s reputation.

Some psychological pricing strategies can be accepted and sometimes even appreciated. Others produce a different result. If a customer expects one price, but the final price is different, and that difference is unanticipated, it can create a negative perception about your company.

Negativity can spread like a disease to the entire network if it is what influences customer reactions. It can be difficult for a customer to forget a bad experience. This is especially true if the issue was not caused by poor customer service but by pricing.

5. Customers could feel like they are being manipulated.

Many psychological pricing strategies are based upon the assumption that customers buy from impulsive moments rather than well-researched thoughts. You risk unhappy customers talking about your pricing if you price items in a way that manipulates how customers use your business online or in person.

People who think about a purchase and can spot manipulative pricing schemes will either try to beat them or they will leave your business to shop elsewhere.


After considering the psychological pricing strategy advantages and disadvantages, you may decide that this type of pricing is not suitable for your business. However, if you do decide to implement a psychological pricing strategy, there are some things you can do to increase its effectiveness.

For example, ensure that your prices end in .99 or .95, so customers perceive them as being lower than they are. You should also use anchor points when setting your prices, so customers have something to compare them to. By taking these steps, you can ensure that your psychological pricing strategy is effective and helps improve your bottom line.

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