Price has a psychological significance attached to it. Buyers have this belief that if a product is highly priced then it is more valuable. Although this belief is more psychological than reality based it makes price tangibles more effective than the product itself.
However, it is interesting that as the buyer starts researching the nature of the product more extensively his decisions become more rational and higher price ceases to be the measuring rod for product value. One good example where psychological pricing is that buyers tend to incline more towards prices that end in uneven figures such as $9, $99 because they believe they are getting a better bargain than if the prices ended in even figures such as, say, $20, $66 etc.
If the products to be priced are in a price “band” as in online auctions or if they are priced in an odd range figures like $199,00 then the products will be considered more valuable than a $200,00 listing. The psychology behind such consumer behavior is that prices in an odd range are usually considered a better bargain. Therefore, it is important to make sure that you have chosen the right price and the right strategy for the product.
Another instance of psychological pricing is reference pricing. Reference pricing is when the buyers relate to a price psychologically since it directly reflects their regarding the relationship of a product to its price. In case of high value products such as luxury items reference pricing is highly influential and an entire business can be capitalized on this basis.
However, one has to be careful while positioning the prices since the strategy may backfire if the buyer feels that the product does not deserve to be in that category. If the product has the features that attract an ego-sensitive buyer then reference pricing is an adequate pricing strategy.
An example of this is high end luxury items which appeal to ego-sensitive buyers. For reference pricing to be successful you must ensure that the price that you have determined for a product fits it best from all angles and viewpoints including your own.
Ensure that the selected price fits the product and the price has been tested before it is released into the target market. The influence of various elements of market on the price tag must also be considered. The product must be fit for a psychological price strategy, the promotional program should be adequate for the pricing strategy and the distribution channels should be in sync with the price and not override the cost of the product itself.
Related posts:
- Price Skimming As a Pricing Strategy
Of all the marketing strategies you will use in your business, the pricing strategy is one of the most important. Along with choosing the right product, intelligent marketing, and a sound sales plan the correct price strategy will determine your revenues and market share. Usually the leaders in their industry... - Offering Discounts as a Part of Your Pricing Strategy
Pricing of goods is difficult. No single determinant magic formula exists that will decide the best price for one’s product. There is no simple strategy but one can take certain measures to make more effective pricing policies. It is difficult to be certain about pricing decisions, one can only rely... - Alternative Pricing Strategies
Pricing is certainly one of the most important factors of your marketing mix strategy. Correct pricing can make your product a hit or a failure in the market. The factors that have to be kept in mind when marketing your product are the following: It has to be of superior... - Market Penetration Pricing
A quick-entry price strategy that presumes that sales volume rise when an object is priced low which in turn reduces the overall costs is called market penetration pricing. This is a useful strategy that can be used in price sensitive markets. For example, consider the market for DVD players; this... - Value Based Pricing
Pricing of a product based on its value judgment is extremely important. Customer preferences, product benefits, company image, convenience and product quality are subjective criteria that will help an organization understand the customer’s perception of the value of its product or service. What customers want is vital. Are they saving... - Pricing: All You Need to Know
If you are trying to sell something on the Internet, pricing your services/ products would be the single most important decision you will take. Since, the Internet provides thousands of alternatives to the customers, you need to be at par with the competition. The prices that you quite will determine... - Pricing Strategies That Improve Profit
Pricing strategies are a sometimes-overlooked part of the marketing mix. They can have a large impact on profit, so should be given the same consideration as promotion and advertising strategies. A higher or lower price can dramatically change both gross margins and sales volume. This indirectly affects other expenses by... - Psychological Impact Of Colors
Colors and the psychological Impact: - White is considered as the color of purity, honesty innocence and openness. The white projects the dirt and filth and it conveys the absence of all these negativity. It also represents virginity and the marriage in the USA. It is slightly paradoxical that eastern... - Promotional Pricing
Usually promotional pricing are used while launching a new product. It is used to stimulate demand for those products which have a lagging demand. The price target buyers are usually the ones looking for the deal. Some examples of these promotional event pricing are meant for special events. These are... - How To Know If Your Pricing Is Right?
If your prices are not perfect you will not get anywhere even if you have the greatest product/service in the world. Internet firms employ three primary pricing strategies- POPS, CAPS AND VAPS. If they are properly implemented, they can just help the firms gaining an advantage over the rest. (POPS... - Competitive Pricing
To figure out whether your items are priced too high or not, do what your customer does. Search the web. According to 2006 yahoo!/OMD, there are about 66% of family who use the Internet to research on a product and 64% use the search engine to buy a product. Take... - Colors and their psychological influence in Marketing.
Colors speak in many languages. As we verbally communicate to people in different dialects, so also the effect of colors in non-verbal communication. The best example would be the nature. Nature the creative artist has made the best ever color combinations on earth, whether it is in flowers, in butterflies... - Pricing According to the Type of Product
Finding the right price for your product is the key to success, in both the long and the short term. The right price for your product would lie somewhere between the cost and the price a customer is ready to pay for your services. The cost would include the expenses... - The Best Online Marketing Strategy
Tips for Starting a New Online Business One of the biggest mistakes that many businesses online and offline make is that they do not have a plan for success. Even though it is an online business, you should still have a business plan and you should have a search marketing... - Sincerity: the ‘Secret Sauce’ for Effective Marketing
A couple years ago, I was talking with someone who was, for me, a very challenging client. I’m all about cultivating relationships that result in opportunities to sell. This particular client seemed allergic to cultivating relationships for reasons I never really understood. I remember one such meeting, I was trying...