Pricing Psychology Statistics

Highlights. Consumer psychology drives pricing strategies, such as charm pricing, which increases sales by as much as 60%.

• Sales increase by at least 24% when using charm pricing, which involves ending prices in 9 or 99.
• A temporary price reduction or “special offer” is enough to influence 80% of consumers to consider a new product or brand.
• 67% of consumers have made an impulse purchase based solely on a special deal, coupon, or discount offer.
• Price perception or “store image” drives 50% of consumers to choose one shop over another.

Psychological Pricing Statistics

Consumer behavior and cognitive biases inform psychological pricing; the ultimate goal is to control consumer perception and influence purchasing decisions at a subconscious level.

• Psychological pricing boosted retail sales 60% in a university joint study from 2021.
• An oft-quoted analysis from 2011 found a 24% increase in sales due to charm pricing (i.e., prices end with 9).
• A 2003 experiment from MIT and The Univeristy of Chicago found that charm pricing increased consumer demand 35%.
• Similar to charm pricing is odd pricing, where retailers price items so the price ends with a 5, 7, or 9; almost  90% of retail item prices end in the digit 5 or 9.
• Approximately 60.7% of retail item prices end in 9; 28.6% end in 5.
• 7.5% of retail item prices end in 0; the remaining 3.2% end in another digit.

Promotional Pricing Psychology Statistics

Studies show consumers have difficulty calculating the true value of promotional items; promotional pricing may manipulate cognitive biases to improve sales.

• Consumers will spend 73% more on a product that offers a “bonus” pack as opposed to the equivalent amount of the same product advertised at a discount.
• 86% of online shoppers are more likely to try a new store or brand due to a coupon; 39% are much more likely to do so.
• Neuroeconomists find coupons decrease stress and increase feelings of positivity (measured using oxytocin levels, which increased 38%) in consumers.
• 69% of consumers born 1981-1996 (a.k.a. Millennials) always look for a deal before making a purchase.
• Promotional pricing strategies include the Rule of 100:
  • Apply a percentage discount to items below $100.
  • Use a dollar amount to advertise discounts for items above $100.

Psychological Pricing & Consumer Perception

Scientists and researchers have studied the connection between item pricing and consumer behavior for over 75 years.

• Researchers identify over 40 popular pricing strategies based on consumer bias and behavior.
• Certain words may trigger an emotional response in consumers; diners at an upscale restaurant spent 8% more when the menu did not use dollar signs ($) or the word “dollar” with its prices (numerals only).
• Visual cues may influence consumer perception; one study found that reducing the font size of an advertised price made consumers perceive the price itself as being “smaller” (i.e., lower).
• Price anchoring strategies use psychological framing to influence consumer perception of price.
  • Example 1: Payment pricing (i.e., offering an installment plan) uses the full, one-time payment price as the larger anchor to the smaller installment payment price.
  • Example 2: Black Friday advertisements prominently display higher (“original”*) prices to the left of lower sales prices; consumers reading the higher anchor price first are more impressed by the discount.
• Prestige pricing uses value perception for luxury item pricing, manipulating the cognitive bias that a higher price correlates with higher quality.
  • Example 1: An item of a lower price and lower quality or value may act as a decoy next to a higher-priced item, making the latter appear more desirable by comparison.
  • Example 2: Price skimming attracts high-paying consumers with an inflated initial price designed to boost the item’s value as a status symbol.**

*The “original” price may refer to the store’s typical price for that item, the price at a competing retailer, the manufacturer’s suggested price, etc.
**The initial price may then act as an anchor price to a discount that attracts deal seekers once the item’s novelty (and prestige) wanes.

More Psychological Pricing Theories

Some pricing strategies appear to work for reasons that may be less obvious or intuitive than other tactics.

• Remove commas from prices. Simply put, a comma lengthens the price and acts as a visual cue that this is a large number.
• Place any larger number next to the price. Even if it’s unrelated to the item itself, consumers subconsciously compare the higher value to the lower value.
• Position prices toward the top and left. American consumers read from top left to bottom right; items in the top left act as a visual mooring while items in the bottom right give the impression of sinking down (i.e., they are heavier or “bigger”).

Sources

1. ResearchGate
2. MIT, Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments
3. USA Today, Money Quick Tips: Be aware of pricing psychology
4. PR Newswire, RetailMeNot Survey: Deals and Promotional Offers Drive Incremental Purchases Online, Especially Among Millennial Buyers
5. Southwestern Assemblies of God University, The Effects of Anchoring Bias on Human Behavior
6. Tilburg University, Research output: Consumer models of store price perceptions and store choices
7. The Economist, Something Doesn’t Add Up
8. Nick Kolenda, The Psychology of Pricing
9. Cornell Univeristy, Diners spend more when menus don’t use dollar signs
10. Marketing Bulletin, The Widespread Use of Odd Pricing in the Retail Sector
11. Capterra, 85% of Online Shoppers Will Exchange Data for Discounts…
12. Business Wire, Coupons.com and Claremont Graduate University Study Reveals Coupons Make You Happier and More Relaxed
13. University of Hawai’i, Principles of Marketing, Pricing Strategies
14. The Wharton School of Business, Crefting Contagious
15. Journal of Consumer Psychology, Size Does Matter