Psychological Pricing: Does It Work? Strategies & Examples

Does psychological pricing generate more revenue? Does it really work? Find out more about what it is and what advantages it can bring to you through this article.

In business, there are two significant realities. The first is that every customer is looking for the greatest deal. The second point is that businesses must make a profit in a competitive market where customers are looking for the best deal. 

So, how do businesses go about doing that? They achieve this by incorporating a perceived value.

When it comes to business, entrepreneurs understand that aside from the typical aspects of it, such as operations and other concerns like online security, businesses these days are much more than a numbers game. Pricing is now considered a strong mechanism to create a brand and increase earnings when approached appropriately.

In that light, you might ask – how do businesses gain access to the full potential of pricing? 

Sure, business owners can learn a thing or two about this in digital marketing courses but we all know that pricing is not merely about putting prices on the products. It’s more about knowing how these numerical figures attract customers to buy, and that’s how psychological pricing is at work with businesses.

In this article, we will discuss further what psychological pricing is, the different strategies that revolve around this concept, and what it can do for your business. 

What is psychological pricing?

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Entrepreneurs are always looking for ways to earn extra money. Some might think that they need a new product to sell, while others think of starting a new side hustle. 

But what most business owners overlook is that they can increase their sales or earn more money just by simply tweaking their products’ pricing.

Psychological pricing strategy is a pricing strategy that employs a variety of approaches to create a psychological or subconscious effect on customers. This strategy is so widely used that brick-and-mortar stores and top online businesses use this.

It combines price and sales methods. It’s also known as setting prices that are less than a full number. The idea is that people will read the slightly lower price and treat it as if it were a reduced price. 

Furthermore, psychological pricing strategy is a pricing approach based on the idea that specific prices have psychological effects. Retail prices are frequently stated as just below a certain value in this pricing approach. There is evidence that customers perceive just-below prices, commonly known as “odd prices,” as being lower than they are by rounding to the next lowest monetary unit.

Psychological pricing helps businesses at the onset of their customer relationship as it introduces what products are being offered.

9 Proven Psychological Pricing Strategies

Every promotion, advertisement, discount, and offer has a well-thought-out strategy behind it with the goal of improving important marketing metrics and KPIs. Below are some of the strategies that have already been employed by several businesses.

1. Price Appearance

The way a price appears to the human eye has an impact on the psyche. Even though the prices are the same, longer prices appear to be more expensive than shorter prices. People instinctively associate time with cost since lengthier prices take longer to read.

This is something you’ve most likely seen in a restaurant. The pricing on many restaurant menus will be written in a smaller font and will not include “0s” or dollar signs. The absence of the dollar sign makes the price appear shorter and removes the direct relationship that individuals have with their wallet currency.

2. Charm Pricing

charm pricing

Companies utilize prices to elicit an emotional response from customers and urge them to take action in a charm pricing approach. Which seems more appealing: $12 or $11.99? A customer’s gaze is drawn immediately to the $11.99 price, and they automatically believe they are saving more money than if they spent $12. Charm price is just a one-cent reduction in the digit farthest to the left.

You’ll see this strategy in Shopify and Etsy stores. Whether the business owner is aware of this strategy or not, it does help with converting shoppers to paying customers.

3. Fear of Time Constraints

buy one get one


We’ve seen and heard this way too many times. To create a sense of urgency, stores often impose an artificial time limit on a sale. 

Time limits are used in stores because they encourage customers to spend more. The psychological strategy instills dread among customers. 

The idea this strategy sends out is that customers risk missing out if they do not act soon. However, the truth is that another sale will always be available.

4. Innumeracy

Even though both options result in the same price, most consumers choose the first option when given the choice between “Buy one, get one 50% off” and “50 percent off of two things.” This example best demonstrates innumeracy, a condition in which customers are unable to grasp basic math principles in everyday situations. 

Double discounting is another psychological strategy used in conjunction with innumeracy, in which an item is marked down by an initial percentage and then another percentage is deducted. 

For example, a product might be promoted at a 25% discount, then the company will provide an additional 20% discount. Customers are led to think that they’re getting a 45% discount when it’s actually only 20% off the discounted price.

5. Prestige Pricing

bvlgari pricing

Odd or charm pricing is the polar opposite of prestige pricing. Prestige pricing entails converting all numerical values to rounded figures, such as $99.99 to $100. 

This is because rounded amounts (such as $100) are more fluently digested and encourage customers to rely on their feelings, whereas non-rounded amounts (such as $99.99) are less fluently processed and urge customers to rely on cognition. Because the purchase is motivated by emotions and the price is processed rapidly, rounded numbers “feel right.”

It generates a sense of evenness and is generally associated with high-end things. The type of psychological pricing used by a brand or corporation is highly dependent on the product’s purpose and focus, as well as the target audiences. 

If done effectively, diversifying tactics and experimenting with marketing methods results in a larger profit margin.

6. Partitioned Pricing

Partitioned pricing is when a product’s overall price is broken down into various components.

According to research, partitioned pricing is often more appealing than not. Typically, this takes the form of splitting shipping and handling charges from the product price. 

What makes this so effective? It has to do with innumeracy once more. The average consumer is unlikely to put up the mental work required to add component prices together accurately. The product’s base pricing bears a lot of weight.

But in some cases, especially if a company is still small, it’s better to consolidate prices. Meaning the business should include all major costs like shipping and delivery fee to the base price to avoid any decision to not continue with the purchase.

7. Low Syllable Pricing

We process everything we read, including numbers, in auditory form. There are things we also say to ourselves. In fact, according to a study on the impact of the auditory representation of prices, the more syllables the price has when spoken, the greater is its perceived value.

8. Comparative Pricing

comparative pricing

The most effective psychological pricing method may be comparative pricing. This basically entails presenting two similar products at the same time, but with one product priced significantly higher than the other. 

This is a psychological choice game for the buyer, who must select between two comparable products with varying costs. This method works effectively with fashion businesses that display tuxedos of equal quality but various costs side by side in order to persuade consumers to choose the more expensive option, which is the preferred buy.

9. Visually Highlighted Prices

Customers believe they are receiving a discount and are not interested in researching the price reduction when you offer a discount with a former price next to a new one. This results in increased purchases. More so, businesses use the psychological technique of changing the font, color, and size of the new price to make the new pricing attractive to consumers. 

Customers see the new price as cheaper and a better deal than the prior price, thus simply changing the font, color, and size of the signage for the current sale price and positioning it a little further away from the old pricing would increase the number of purchases.

Another great example of utilizing the visuals of numbers is showing statistics that reflect how much a company has already helped or how many customers a company has gained because of its trustworthiness. 

A study resource website, for instance, shows large quantities on its welcome page to attract new potential customers.


If not statistics, other quantifiable series of numbers are also shown to reflect a perceived idea of the products or services offered. Preply, a language tutorial website, for example, uses this visual tactic a lot.


When it comes to the visuals or graphic designs of your promotional posters, you can always seek help from web designers who know what to do in terms of psychological pricing on the world wide web.

6 Theories Behind Psychological Pricing

To help us better understand what psychological pricing is, let us also touch on some theories that support this concept.

I) Digit Ignorance

This is comparable to left-digit bias in that the left-most digit is the only one that is appropriately addressed. However, digit ignorance is not caused by a preference for the left digit. It’s because the other digits aren’t taken into account. It’s possible that fractions of a dollar aren’t significant enough to take into mental calculations.

II) Band Segregation

This occurs when an item’s price is purportedly reduced to position it in a lower pricing “band.” Because most individuals search for pricey products within a budget, it’s prevalent with vehicles and houses. 

This indicates that they have a maximum price in mind, sometimes known as a pricing range. Take, for instance, a car that costs $39,998. This automobile will appear in searches for automobiles around $40,000.

III) Prospect Theory

According to prospect theory, buyers experience value uncertainty because they base their decisions on a reference point rather than absolute worth. 

To put it simply, when they see $3.99, they think of it as less than $4.00 rather than more than $3.98. The starting point is $4.00. We frequently utilize whole numbers as our reference points since they are easier to comprehend. This takes the brain less effort to process. The value of a price is determined by its relationship to the reference point. In the case of $3.99, it is less than $4.00 in the eyes of the consumer.

udemy course prices

Physical stores aren’t the only ones using this effect. Even people in the digital space take advantage of this. When they’re selling their online courses, their ebooks, or any other digital products, you’ll see this theory often used.

IV) The Left Digit Effect

We are predisposed toward the first digit we encounter as left-to-right readers, rather than by sober mathematical rounding. We think $5.99 is more like $5 than $6.

V) Fractional Bias

There could also be a preference for fractions. If a consumer is presented with a fractional number, their thinking is that it’s already the lowest price possible. Imagine believing $30 was a reasonable price for something. You may now get it for $29.99. “Wow,” you think, “if they could only afford to cut it down another cent, it must be a very reasonable price.”

VI) Whole Number Quality

The pendulum swings in both directions. If fractional bias informs customers, 99 pricing are fantastic bargains, and whole number prices can sometimes express quality. 

When a price is expressed as a whole number, it implies that the item is not on sale. Some people see this as a sign of superiority. People must not need to be enticed to acquire anything if it isn’t reduced.

This is common in fine dining menu engineering when a specialty whiskey will be priced at $13.00 flat. This is what is known as psychological alcohol pricing. The restaurant is banking on the quality perception that comes with whole number pricing.

Finli pricing

An example of this would be Finli. As you can see above, it would’ve been easier for the company to go for $24.99, $64.99, or $124.99. But they stuck on what they believe in that the number of solutions you’ll get when using their product will be worth the price.

Advantages and disadvantages of psychological pricing

Psychological pricing, like everything else in life, has its advantages and disadvantages. It can be extremely useful in certain cases, but it can also cause more harm than good in others. The advantages and disadvantages of psychological pricing are listed below.


  • Increased return of investments – For one-time sales, psychological pricing discounts can provide a high return on investment, especially during high-volume seasons like the holiday season. Obtaining a large return at the end of the day is likely with promotions that appeal to the masses.

This is even more applicable with artificial time constraints, a kind of strategy wherein customers are prompted with a sense of urgency to buy. Customers will want to act quickly to avoid missing out on the offer. This will also increase the likelihood of a quick and large return on investment.

  • Improved decision-making process – The majority of psychological pricing strategies make consumers’ decision-making process easier. Consumers will be less concerned about their investment if the discount or promotion is clearly put out. This is fantastic news for retail shops that rely on one-time sales.
  • Boost of product attention – Any form of large promotion will increase the number of people that are aware of your product. If you manage a physical store, displaying large, red signage announcing your product promotion will compel customers to look at what you’re selling. Even if no one buys, your brand is becoming more well-known.
  • Easy to utilize – It’s simple to accomplish. By changing a single number, you can already implement an entire strategy. Of course, this requires careful observations and trial and error, but the idea is, you’re dealing only with numbers and how these numbers relate to your target consumers.
  • Gaining new perspectives for the business – You may truly be proactive in your pricing approach with a psychological pricing plan. You can think about factors like the public perception of your products, competitor comparisons, and more instead of merely striving to maximize revenues or break even.

Even better, if you want to adopt a psychological pricing approach, you’ll need to conduct extensive research into who your competitors are, what methods they employ, and what your target audience thinks of those techniques. 

This study provides you with a wealth of information that you may apply throughout your company. Overall, psychological pricing is applicable to almost all kinds of businesses regardless of the niche.


  • Misunderstood value – There’s always the risk of misunderstood value when using psychological pricing techniques. The way you communicate value to your customers is through your price. 

This form of communication is dependent on your customers’ pricing views. If you decrease your pricing solely to get a quick sale, your customers may have a negative perception of your product quality and come to expect those low costs on a regular basis. 

This is also why it’s important to consult legal experts who are knowledgeable about these matters to ensure that your pricing won’t be taken against your business when someone feels the need to complain.

  • Insincere for some customers – Some people may be able to see right through psychological pricing strategies and regard them as exploiting consumers. Some, on the other hand, may identify the strategies and embrace them as necessary business practices.
  • Not a long-term business solution – Using psychological pricing techniques is not a long-term pricing strategy. For a limited time, it may bring you quick conversions, but B2B enterprises should have a more robust and long-term strategy in place. Customers have a lot of trust in SaaS firms because they are predicated on recurring revenue. Pricing strategies may jeopardize that trust.
  • May hurt your brand’s reputation – A brand’s reputation might be harmed by having a large number of discounted items. That is if the reputation is built on distinction, luxury, or excellence. 

As we’ve seen, some consumers believe that discounts reflect adversely on a product’s quality. The same thing goes when you always have discounts. Some customers may question your authenticity as a brand if that is the case.

Real-Life Examples of psychological pricing

You have undoubtedly come into contact with psychological pricing methods, whether you are aware of it or not. Here are a few instances of the tactics we discussed earlier.

uniqlo charm pricing

This is an example of charm pricing. Notice that the original price of this Uniqlo apparel is close to even. To make it more appealing to customers, they made the price more “odd” in that sense.

tom ford h and m pricing

The above shows that the left shirt appears more expensive because of the use of the whole number to denote luxury while the right shirt appears cheap because of the “discounted” price.

Flash sale

This promotional poster shows the keywords “Today only!”, “Flash Sale!”, and “While supplies last” to create a sense of urgency.

udemy flash sale

Creating a sense of urgency isn’t just useful for groceries and shopping outlets. Even online course platforms take advantage of this psychological effect.

after christmas promotion

As what we’ve talked about, businesses would also employ other tactics like playing around with the visual appeal of their promotions. Take the above promotion, for example, it is blazing red because it wants to send an idea that this is important and that the consumers shouldn’t miss it.

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INECTA Food is a great example of comparative pricing with the careful use of colors, with dark green being the most favorable option for the customer.


The term “psychological pricing” can refer to a variety of pricing tactics, including a few that we’ve discussed in this article. However, there are no restrictions – in all honesty, any pricing plan that relies on consumer perceptions of product worth is essentially psychological, so go wild.

For example, if you have a reselling business, you can incorporate and play around with the lessons on pricing you’ve learned here. See what works well and dump what doesn’t.

If you’re on Amazon and you’re concerned about repricing analytics, you may also find great help from software that helps you go over repricing that will benefit your business.

Lastly, you just have to keep in mind that internal alignment is the most crucial. Psychological pricing strategy works best when they’re combined with marketing and sales to give your customers a consistent experience across all of your channels. 

Psychological pricing strategy exists for a reason and it’s what businesses have been employing for such a long time now. All you need to do is to make sure that your brand stays true to its values so your consumers will know that you’re not here just for the sales, although it’s really what you’re after if we’d have to be honest.

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