Psychological Pricing Strategy: Definition, Purpose, Strategy, Examples, and Pros/Cons

What is Psychological Pricing?

Psychological pricing involves setting prices slightly below whole numbers to trigger a favorable reaction in customers. By presenting prices like $3.99 instead of $4, the aim is to create the perception of a lower cost.

This strategy taps into how our minds process numbers, focusing more on the leftmost digits and disregarding the cents. It’s a clever way to influence consumer behavior subtly.

Essentially, it’s about tweaking prices to elicit emotions that prompt purchases, regardless of whether the prices are higher or lower than others in the market.

Understanding how people perceive prices is key; often, buying decisions are based more on emotions than pure logic. Hence, crafting pricing strategies that engage with these emotions becomes crucial for long-term business success.

Purpose of Psychological Pricing

The purpose of psychological pricing is to influence consumer perception, urging them to perceive prices as more attractive or affordable. By using slightly lower prices, like $3.99 instead of $4, it aims to tap into subconscious biases, making customers more likely to purchase.

This pricing strategy leverages human psychology, focusing on emotions rather than logic, to encourage buying behavior and boost sales without necessarily reducing actual prices.

Advantages and Disadvantages of Psychological Pricing

Let’s dive into the advantages and disadvantages of psychological pricing:

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  1. Perceived Value: Customers often perceive prices ending in 9 or 99 as lower, leading them to believe they’re getting a good deal. It creates an illusion of affordability and value, enticing them to buy.
  2. Increased Sales: Lowered prices (even by a cent) can boost sales volume as customers are psychologically drawn to the perception of a better deal, encouraging purchase.
  3. Competitive Edge: Employing psychological pricing can make your products appear more appealing compared to competitors who use rounded figures. It can persuade customers towards your offerings.
  4. Emotional Appeal: This strategy taps into emotions, triggering impulsive buying behavior. Customers might feel they’re saving more, thus compelling them to make quicker purchasing decisions.
  5. Customer Perception: Non-rounded prices often convey the impression of being carefully thought out, signaling quality or strategic pricing, influencing customers’ positive perceptions.
  6. Marketing Flexibility: By adjusting the digits in pricing, businesses can experiment with different price points, evaluating which ones attract more buyers.


  • Loss of Credibility: Overuse of psychological pricing might lead to skepticism among customers. If every product ends in 9, it can appear gimmicky, losing trust.
  • Perception of Quality: Extremely low prices might convey a sense of inferior quality. Some customers associate higher prices with better quality, and overly low prices could counter this perception.
  • Complex Checkout Process: Displaying prices that differ slightly can lead to confusion during the checkout process, causing frustration for customers.
  • Potential Profit Reduction: Though increased sales are a pro, it might not always translate to increased profits, especially if the reduced prices significantly impact margins.
  • Long-Term Effects: Relying heavily on psychological pricing might condition customers to expect discounts constantly, making it harder to sell at regular prices later on.

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Psychological Pricing Strategies

There are different ways you can implement a psychological pricing strategy in your business. The following are the six popular strategies for it:

Odd Pricing

This technique involves setting prices just below a round number, such as $9.99 instead of $10. It plays on the psychological tendency for consumers to perceive prices ending in 9 or 99 as significantly lower, triggering a perception of better value. It exploits the human habit of focusing on the left digits while neglecting the cents, making the price seem more appealing without significantly affecting profit margins.

Prestige Pricing

This strategy involves setting prices higher than the standard market price to convey a sense of exclusivity, luxury, or superior quality. Companies employing prestige pricing are often associated with high-end products or services. Customers sometimes equate higher prices with better quality, thus enhancing the perceived value of the product. This approach is common among luxury brands, enticing customers who prioritize status and exclusivity.

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Customary Pricing

This method relies on maintaining consistent pricing for specific products over time. It establishes a perception of reliability and consistency, making customers confident in the product’s value. Even if competitors offer lower prices, customary pricing builds customer trust and loyalty, as they rely on the stability and predictability of the pricing.

Superficial Discounting Pricing

This strategy involves presenting discounts that might not genuinely affect the product’s price significantly. Businesses might increase the base price and then offer discounts, making customers feel they’re getting a better deal than they actually are. It capitalizes on the psychological appeal of discounts while maintaining profit margins.

Charm Pricing

Charm pricing revolves around reducing the leftmost digit by one, setting prices slightly below a round number, like $39 instead of $40. It leverages the psychological perception that customers tend to process the first digit more significantly than the cents. This approach aims to create an impression of a considerably lower price, influencing purchase decisions.

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Artificial Time Constraints

This technique involves creating a sense of urgency or scarcity by imposing time constraints on purchasing decisions. Limited-time offers, flash sales or promotions with countdowns tap into consumers’ fear of missing out (FOMO). It compels customers to make quicker decisions, fearing they might lose out on a deal.

Examples of Psychological Pricing

Psychological pricing is a popular pricing strategy in business – here are some examples to mention on how different businesses are adopting it and implementing:


Amazon frequently employs percentage-based savings in their product listings. Displaying the original price alongside the discounted price instantly shows customers the amount they save. This technique triggers the desire to capitalize on perceived savings, encouraging quicker purchase decisions.

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Walmart is a pioneer in implementing “Black Friday” sales events. They capitalize on time-bound offers, scarcity tactics, and the “limited time only” approach, creating a frenzy of buying during this period. The urgency created by limited-time offers and discounts prompts customers to act swiftly to secure deals.


Apple skillfully employs prestige pricing for its products. By setting higher prices for their iPhones, iPads, and MacBooks compared to competitors, they convey a sense of exclusivity and premium quality. Apple’s brand image and customer loyalty allow them to justify these higher price points.


Rexona uses rounded pricing strategies effectively. By offering products at fixed, rounded prices like “2 for $10” instead of “$7 each,” they simplify decision-making for customers. This tactic influences perceptions of affordability and encourages bulk purchasing.

Clothing Retailers

Many clothing retailers regularly use superficial discounting pricing strategies. They often mark up base prices slightly higher and then introduce sales, presenting discounts that seem substantial but maintain healthy profit margins. These sales and discounts capitalize on customers’ attraction to perceived value, encouraging increased sales volumes.

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