Price is usually defined as “what the consumer must give up to purchase a product or service.” However, there is so much more to pricing than that. Pricing is one of the most powerful effects of marketing. Every decision you make when purchasing an item or service is based on the price. It’s usually the most important element when deciding to buy something. Price tells the you if the product is quality, luxury, commodity, overpriced, or a bargain. Even if the you like the item and desperately want it, if you don’t like the price, you won’t buy it. Many people believe that pricing is composed of 3 factors: 1. the cost to make the product 2. the profit 3. what the competition displays. However, there is tremendous psychology at work. Psychological
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Prices are designed meticulously with the thought of steering the consumers to certain products and to tempt us to spend more than what we originally planned on. Furthermore, this method helps marketers, build brand impression without wholly altering the product. Just changing the pricing on a product can make a consumer view it as a bargain or elevate it’s value. However, there are two things marketers should take into consideration when applying Psychological Pricing. Firstly, the marketer should keep in mind the target audience. They should be aware of the crowd which they wish to appeal to and how that audience would respond to their prices. The second factor marketers should determine, is the product they are selling. Certain products may not sell well through administering certain strategies. One of the most popular pricing strategies is called Odd-Even Pricing; it is based on the idea that certain prices appeal more to consumers by changing their perception of the item’s value. Prices ending in 99, 97, 95, and 9 are generally known as charm prices. In Priceless, William Poundstone follows eight studies and he discovered …show more content…
In an experiment done by MIT and the University of Chicago, a clothing item was tested at 3 different prices: $34, $39, and $44. The researchers found out that the item sold best at $39, even outranking the cheaper price of $34. Many attribute this behavior to the Left Digit Effect, which states that because humans look at numbers from left to right (in the same manner as we read) consumers tend to look at numbers like $5.59 as just above $5 and not as below $6. The exact opposite of Odd-Even Pricing would be Prestige Pricing, in which prices are set higher than is usual because lower prices will be detrimental to sales. This method is generally used with luxury items such as jewelry, automobiles, watches, and designer purses. When using Odd-Even Pricing strategies, marketers are manipulating consumers into believing that the price (19.99) is significantly lower than the rounded number (20.00). Through this tactic marketers are sending a message to consumers that their
Prices are designed meticulously with the thought of steering the consumers to certain products and to tempt us to spend more than what we originally planned on. Furthermore, this method helps marketers, build brand impression without wholly altering the product. Just changing the pricing on a product can make a consumer view it as a bargain or elevate it’s value. However, there are two things marketers should take into consideration when applying Psychological Pricing. Firstly, the marketer should keep in mind the target audience. They should be aware of the crowd which they wish to appeal to and how that audience would respond to their prices. The second factor marketers should determine, is the product they are selling. Certain products may not sell well through administering certain strategies. One of the most popular pricing strategies is called Odd-Even Pricing; it is based on the idea that certain prices appeal more to consumers by changing their perception of the item’s value. Prices ending in 99, 97, 95, and 9 are generally known as charm prices. In Priceless, William Poundstone follows eight studies and he discovered …show more content…
In an experiment done by MIT and the University of Chicago, a clothing item was tested at 3 different prices: $34, $39, and $44. The researchers found out that the item sold best at $39, even outranking the cheaper price of $34. Many attribute this behavior to the Left Digit Effect, which states that because humans look at numbers from left to right (in the same manner as we read) consumers tend to look at numbers like $5.59 as just above $5 and not as below $6. The exact opposite of Odd-Even Pricing would be Prestige Pricing, in which prices are set higher than is usual because lower prices will be detrimental to sales. This method is generally used with luxury items such as jewelry, automobiles, watches, and designer purses. When using Odd-Even Pricing strategies, marketers are manipulating consumers into believing that the price (19.99) is significantly lower than the rounded number (20.00). Through this tactic marketers are sending a message to consumers that their