PRICE PLOY: Psychological Pricing and Number 9
Why is a product priced at £19.99 instead of £20?
This is an example of psychological pricing.
The answer seems deceptively simple: £19.99 is cheaper than £20 and so I'm more likely to buy it.
But what if I told you the product was going to be priced at £19?
You've been encouraged to spend an extra 99p.
Psychological pricing is a manipulative strategy used by businesses to make you spend more money.
As part of a new series - Price Ploy - I reveal the big business behind psychological pricing and how you can watch out for it. You can read the introduction to the Price Ploy series here.
What is psychological pricing?
Psychological pricing is a marketing trick used to make you think a product is cheaper than it really is.
The most common example is when a price is reduced by a penny, £20 to £19.99.
It's based on what highly-paid marketing strategists call the 'left digit effect'.
We read left to right. Starting a price with '1' rather than '2' immediately puts it into a lower price bracket.
Why should I care about psychological pricing?
Psychological pricing costs you money.
The trick is to make you think you've got a discount: The price of £19.99 implies there is already a penny reduction from what we think it should be, £20.
You don't stop to wonder, why isn't it £19.50, £19.01, or even £19?
I'll say that again - just because it's £19.99 doesn't mean it should have been £20.
Prices ending in '9' make you spend more money
Putting the number 9 at the end of a price makes you more likely to buy a product, even if it's more expensive.
Quantitative Marketing and Economics, an academic journal, published a study which found prices ending in 9 outsold even lower prices for the exact same product.
What can I do about psychological pricing?
Ask, what is the fair price I am willing to pay for this?
Only you can decide how much you want to pay for a product. If you think a dress is worth £39, then pay £39. If you stop and think about it - how much it would have cost to make, how much it is worth to you, how much value and enjoyment you will get from it, and you're happy with the price then go for it.
If your gut tells you this seems expensive, even after the massive discount and compared to alternatives... trust it. The greatest defence you have against Price Ploys is not to buy.
At Latest Deals, we are very conscious of psychological pricing. That's why the goal is always to find the lowest price regardless of number. Being part of a community of bargain hunters helps as you have other member to check your decisions: the same product is cheaper over here!
Next time on Price Ploy...
I'll be looking at a pricing strategy called "Predatory Pricing": when a business aggressively lowers prices to drive out competitors. It may sound good for you, but in the long-run it can have bad consequences.