Psychological pricing is a strategy that retailers can take advantage of, whether they operate online, offline, or in multiple channels.

When retailers tap into these pricing tactics, they are able to effectively boost sales and conversions.

There are a variety of pricing tricks and tips to entice shoppers to buy, so price intelligently to benefit from this phenomenon.

If you could have one superpower, what would it be? No need to say mind-reading, because knowing the tricks of psychological pricing will get you inside the thought processes of your customers.

Psychological pricing is a tool that retailers can use to subconsciously increase the chances that a customer will make a purchase, including:  

1. Charm pricing

Charm pricing is a strategy that takes advantage of relative and anchor prices to make a product more appealing solely because of its listed price.

This is not lost on anyone who has seen rows on rows of $0.99 candy bars in a convenience store. The number nine does a great job convincing customers they are getting a deal.

That’s not the only way retailers can get cute with their pricing. Ever notice the difference in font size between the dollars and cents on the billboards promoting Burger King’s new meal deal?

That “.99” is tucked up in the corner in a tiny font in order to make you forget it even exists.

Even if you do notice it, your eyes will fixate on the bigger number, and you will use that as the reference when comparing its value.

There are even a few other charm pricing techniques that do not involve the number 9. Random numbers like $1.64 make it seem like the retailer is selling it to you as cheaply as they can, while luxury brands embrace no-nonsense prices like $25.00 to convey they do not need to resort to charm pricing to make their goods desirable.

Know what you want customers to think of your product, and you can alter your list price accordingly.

2. Bundling to reduce purchasing pain

What I’m about to say may come as a shock, so brace yourselves: Some people do not like buying things.

It’s shocking, I know, but a good portion of people like spending their hard earned money as much as removing their own teeth with rusty pliers.

In order to get these customers to reach deeper into their pockets, bundling goods can be effective. Just ask McDonald’s.

Bundling is common outside of value meals as well, from three-piece suits to software suites (like Microsoft Office).

But in the end, selling in bundles is not far from selling in bulk. You throw in more products and offer a slight discount on the unit price in return. 

3. Flash sales

Flash sales can be very effective psychological tools, as they convey exclusivity in addition to urgency.

If a flash sale site, such as Rue La La, offers a popular enough sale, the inventory may not make it until the end of the designated time.

Customers know this too, and will leap at the chance to get a rationed good, let alone at 50% off. Retailers could even take this one step further by offering personalized time-sensitive coupons to some of their more loyal customers.

Keeping loyal customers happy+moving inventory+increasing traffic= that ever-elusive win-win-win. 

4. Anchored pricing

Anchoring is simply convincing customers into thinking they are getting a steal using relative value. By introducing a premium option to a standard product, customers will find the standard has more value when compared to a more expensive product with extra features.

Therefore, customers who don’t make the jump are more likely to purchase the original with the expensive anchor in the back of their heads.  

Software companies do this constantly. By offering a deluxe package with a bunch of features, the average consumer may not even be able to pronounce, the standard and cheaper option will look like a bargain in comparison.

5. Buy one, get one free

People love free stuff. They just cannot get enough. Amazon knows this, which is why the company has fought tooth and nail against France, the one country banning the free shipping of books.

It doesn’t matter if the purchase was $200 worth of vintage Pokemon apparel, if the shipping was free, consumers find that a bargain. Beware: even though free products are a great way to hook customers, they could lessen the perceived value of those products. 

Contributing writer: Jack Symington

Ari Shpanya

Published 1 July, 2014 by Ari Shpanya

Ari is the co-founder of HomeShare and Zent , Graduate of the GSB Stanford Ignite program, and a contributor to Econsultancy.

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Comments (4)

Daniel Gilbert

Daniel Gilbert, CEO at Brainlabs

Great article, thanks! Not seen anything on anchoring for a while but there is a clear effect there.

about 4 years ago

Pete Austin

Pete Austin, Founder and Author at Fresh Relevance

Great summary. But I wonder about your example of MacDonald's using "Bundling to reduce purchasing pain".

Personally I would buy more from budget restaurants like KFC or McDonalds if bundling didn't make their pricing so dreadfully complicated.

When collecting an order for the family I have literally stood there for several minutes trying to work out the best way to parcel it up. If I swap a chicken piece for a couple of hot wings, will the order be cheaper? Can I get extra fries for a few pence if I choose some special offer?

Anyone know of a third party app to simplify the pricing again?

about 4 years ago


Colin McDermott

Yep, well written piece Arie - enjoyed revisiting the psychology of pricing with you. Another that we've always used is the 'ugly' price. Instead of using 'attractive' numbers of the £9.99 type ... where it's appropriate, we use (real) numbers like £8.47 .. etc.

about 4 years ago

Ari Shpanya

Ari Shpanya, co-founder at

Glad you enjoyed it, Daniel.

Pete, value meals can definitely get tricky. Another example of bundling is Microsoft Office. Instead of having to deliberate about whether to individually buy Excel, Powerpoint, Word, etc, Microsoft bundles all of them for one reasonable price to save you the decision-making effort (and a little bit of money, if you wanted all of them). This is especially effective in software industries where economies of scale are high and marginal costs are low, as any additional revenue is worth pursuing.

Thanks for your comment, Colin. I agree that "ugly" pricing is very effective because it makes consumers feel like they're getting the best deal you can offer. I'm glad that you have success with this strategy because it has certainly been useful for retailers, like Walmart.

about 4 years ago

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