What is “Psychological Pricing”?

Psychological pricing is a strategy that influences consumer buying behavior by appealing to emotions rather than logic. It typically involves setting prices just below round numbers (e.g., $19.99 instead of $20) to make the price seem significantly lower. This technique taps into how customers perceive value and makes products feel more affordable or like a better deal.

Example

"The e-commerce brand used psychological pricing by listing their new hoodie at $29.99 instead of $30 to make it feel like a bargain."

How is “Psychological Pricing” Used in Business?

Businesses across retail, digital products, and services use psychological pricing to drive conversions and sales. It’s especially effective in online marketing and e-commerce, where subtle differences in pricing can significantly influence buying decisions. This approach helps reduce buying hesitation and boosts perceived value.

Pro Tip

Use psychological pricing with clear messaging and quality offerings. While it can improve sales, overuse or manipulation may erode trust if the product doesn't deliver on expectations.

Related Terms

Value-Based Pricing, Charm Pricing, Price Elasticity, Customer Perceived Value