Psychological Pricing Definition
Psychological pricing, also known as price ending, is a pricing strategy that is based on the theory that consumers are more likely to purchase a product if the price ends in a certain number. The most common numbers used are 9 and 5. For example, if a product is priced at $19.99, it is more likely to be purchased than if it was priced at $20.00.
The reason why psychological pricing works is because humans are hardwired to process information in certain ways. When we see a price that ends in 9 or 5, our brain automatically rounds down the price. So even though the difference between $19.99 and $20.00 is only 1 cent, our brain perceives the $19.99 price as being significantly lower than the $20.00 price.
There has been extensive research conducted on psychological pricing and its effects on consumer behavior. Studies have shown that using psychological pricing can increase sales by up to 24%. Therefore, it is an effective pricing strategy that businesses should consider using when setting prices for their products and services
