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What is Psychological Pricing, And Does It Really Work?

    People talk a lot about psychological pricing and whether or not it helps businesses sell more products. So, what is it and how does it work? Psychological pricing is a way for stores to make things look cheaper than they really are.

    Some items are priced at odd amounts, like $99 instead of $10, or words like “sale” or “discount” are used. Even though the jury is still out on whether or not psychological pricing helps businesses sell more products, there is evidence that it can make customers feel like they are getting a good deal, which may lead them to buy more items.

    So now, let’s look at psychological pricing in more depth:

    How does psychological pricing work?

    You’re walking by your favorite store when you see “BOGO 50%!” written in the window. “Today only!” Then you came back and bought something you didn’t need. If you said yes, my friend, you are one of the millions of people who have been hurt by psychological pricing. But that’s all right. Psychological pricing is used in many ways by stores, restaurants, and other businesses. This is a good way to get people to buy quickly, but can SaaS companies also use it? Here are some things to think about when it comes to what psychological pricing is, its strengths and weaknesses, strategies, and whether you should use it in your B2B business.

    It’s a way of setting prices that uses the power of human psychology or the subconscious to get people to spend more money. Usually, this means working together across business functions (like sales, marketing, and customer success) to use market trends to make offers to customers that are more appealing.

    Psychological pricing is also called “setting prices lower,” which is not what it is. For example, people think that $99 is cheaper than $100, and they are less likely to bargain for just one dollar. This is where you get your margin. Discounts are another way that retailers can use psychology to help them sell their products.

    This sounds good, doesn’t it? But every good thing also has a bad side. Let’s look at what’s good and bad about psychological pricing:

    Pricing based on psychology has both pros and cons.

    Psychological pricing has its pros and cons, just like everything else in life. It can work well in a lot of situations, but sometimes it can do more harm than good. Now, I’ll list some pros and cons of your psychological pricing strategies that you should think about. Let’s start with the ones that are good.


    • Consumers will be more interested in your product if more people know about it. If you have a storefront business, a big red sign advertising a sale will force people to look at what you’re selling. Even if no one buys, at least your brand will get noticed.
    • Higher Return: Psychological discounts can give you a high return on a one-time purchase, especially during busy times, which are also called Festive times or holidays. Behavior that brings in a lot of people can pay off in the long run.
    • Simple way to make a choice: Most psychological pricing strategies make it easier for customers to decide what to buy. When discounts and sales are set, people think about spending less money. This is good for stores that make money from a single sale.
    • Depending on the strategy used, psychological pricing can make people feel like they need to act quickly. Customers will want to know what’s going on so they don’t miss out on a good deal. This will also help you get a high return on your investment quickly (RoI).


    • Tactical Recognition: Some people may see that a business is using psychological pricing to take advantage of its customers. But some people may be familiar with tactics and see them as the core of doing business.
    • Not for the Long Term: Using pricing strategies based on how people think is not a good way to set prices for the long term. It can be changed quickly, but B2B companies need to make more solid plans for the long term. Recurring revenue is what makes SaaS companies work, which makes customers trust them a lot. Using tricks to figure out prices can hurt their credibility.
    • Misunderstood Value: There is always a chance of misinterpreting value when using psychological pricing strategies. At your price, you give your customers more than what they paid for. How your customers see your prices affects this kind of communication. Keeping prices low just to get people to buy things quickly could mean that people don’t care as much about the quality of the products they buy and expect those low prices to last.

    Popular Pricing Strategies/Plans Based on Psychology

    All discounts, promotions, ads, and transactions are based on well-known strategies. These four are the most common:

    Pretty Prices

    All prices in stores that end in “9” are called by this fancy, more formal name. Researchers at MIT and the University of Chicago have found that prices ending in “9” make people want to buy more of a product. The scientific reason for this is that most people read from left to right. So, when you see a price of $1.99, you’ll first see a “1,” which tells you that the price is close to $1.

    Charm pricing can also work the other way around. Prices that end in “9” are a good deal. This means that the price is very good. On the other hand, prices that end in “0” can mean more prestigious prizes and better quality items. If you want people to think your product is better, you shouldn’t price it in an appealing way.

    Time Limits Made by People

    “BOGO! ONE DAY ONLY!” We’ve all seen this ad to at least a few songs. Stores will put a fake deadline on a sale to make people feel like they need to act quickly. Time limits are set in stores because they make people more likely to buy things. Customers feel worried when they think about the strategy. If they don’t do something right away, they might miss out. But the truth is that there will always be another sale.

    Not having enough

    If you have a choice between “buy one and get 50% off one” and “buy two and get 50% off both,” most people will choose “buy one and get 50% off one,” even if both options have the same price. This is the best example of a situation in which the client doesn’t understand basic math concepts that are used in everyday life.

    Akshay Rao of the University of Minnesota School of Business did a study that showed people aren’t discounting because they want something else. “We don’t know how to do math, so we’d rather get more things than just one discount,” they said.

    Double discounts are another hidden psychological trick that is used in a lot of different ways. In this case, the price of the item is cut by the first percentage and then by a second percentage. For instance, you can advertise an item that is 25% off. The company will then give a 20% discount on top of that. Customers might think that this is a 45% discount on an item, but it’s only a 20% discount from the sale price.

    List of Prices

    How a rate looks to the naked eye has an effect on the mind. Even though they are the same number, fees that are longer seem to be more expensive than fees that are shorter. The idea is that because longer prices take longer to look at, people subconsciously link time with price.

    Many restaurant menus have a smaller type of price that leaves off the “0” and the “$” sign. You’ve seen this for sure in a restaurant. If you leave out the “$” sign, the price will be shorter and won’t have anything to do with how much money you have.

    A Few Examples of Psychological Pricing

    Whether you know about them or not, you’ve definitely been exposed to psychological pricing techniques. Here are a few examples of some of the methods we just talked about.

    After Christmas/Diwali Sale

    Okay, so after-Christmas and Diwali sales are great because you can get what you want at a price that will catch your eye (you attracted because of Mental or you say psychological pricing).

    Recently, a lot of companies have started using more than one strategy. The ads that have been showing up lately have a lot of numbers and equations. The main point I want to make is that I need to hurry up and get to work. The company thinks that if they throw out a lot of numbers, people won’t take the time to figure out how good those percentages are.

    Sales at the end of the year

    In recent years, many psychological prizes have also been shown in End of the Year (EotY) ads. For example, “$ 89” is a number that stands out to me in this ad. This price in particular is a great example of a good price. If the ad says “90,” which is almost 100, that $89 looks like a much better deal.

    Unique sales, deals, and offers

    Then there are ads that take advantage of the time limit, like this one for a “exclusive transaction.” Usually, there is a banner at the top of the page with a stopwatch that shows how much time is left to make the advertised transaction. The message “The offer ends in hours, minutes, and seconds” is shown. Running watches can make customers feel scared. They can see that time is running out, so they tell you to buy right away.

    The Food

    The “Menu” example above is a perfect example of how price display works. The whole menu at a simple HoReCa (Hotels, Restaurants, and Cafes) is simple and easy to read. Right next to the name of the menu item is the price. The price isn’t cheap, but the “0” and “$” signs aren’t there. For example, a dish costs $14, but the price is only written as $14 on the menu. Not only does this look cool, but because it’s shorter, 14 looks cheaper than $14.00.

    Is it a good idea to use psychological pricing techniques?

    Do I think psychological pricing is a good idea? This is where I give my “Personal Opinion.” But I think that B2B SaaS companies have a much better way of setting prices. The recurring revenue model looks at how the company and its customers work together. Setting prices based on value is a much better way to keep customers in the long run.

    Psychological pricing is better for stores that want to make money quickly. Some stores do well with one-time sales and will do anything to close a deal quickly and make their psychological pricing strategies work.

    But I think you should add value instead of giving a discount when selling to businesses. Instead of lowering the price, give out more for the same price. This lets you raise the value and credibility of your brand while keeping its fame.

    Pricing Based on How People Think

    When most people think about pricing, they consider how much the product or service costs and how much profit they want to make. But there’s another part of pricing that people don’t always think about: psychological pricing. Psychological pricing is when prices are set that aren’t based on how much they cost but on something else, like the numbers, etc.

    Psychological pricing is a theory that says people make decisions about how valuable something is based in part on how much it costs. By changing how customers see the value of a product, this way of setting prices can help a business make more sales and money. There is some disagreement about how effective psychological pricing really is, but many businesses still use it.


    In the end, psychological pricing does affect how people decide what to buy. But it’s important to remember that not all consumers are affected the same way, and not all products can be priced this way. Before using a psychological pricing strategy, marketers should think carefully about who they are trying to sell their product to. It is a method that can be used to change the way a buyer acts. Even though many marketers think it is a good way to boost sales, there isn’t much evidence to back this up. More research is needed to find out if psychological pricing works or not.

    The people who wrote the study say that the results could affect businesses that use psychological pricing. The study’s co-author, Dr. Vanessa Patrick, said in a statement, “Our findings suggest that marketers should be careful about the special offers they use and how they present them to consumers.” “For example, a store might not want to use a “buy one, get one free” deal because it can actually cause them to lose money.”

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