Pricing is … Psychological

If people were rational, well, economic theory would work.  Buyers would make purchase decisions based solely on the value of the acquisition relative to the price.  But we know people aren’t rational in many ways, including price. 

For example, if people were rational, why would so many prices end in 99 cents?  (Because we are lazy subtractors.)

Why would people assume a product is higher quality just from the price?  Shouldn’t they know the quality first and then decide if it is worth the price?

Why do people get so upset when they see “unjustified” price increases?

We can manipulate consumers choices by offering good, better, best product offerings.

We can confuse them with too many choices.

We can get them excited about and move them to action with a sale.

They will pay more (or less) for the exact same object depending simply on what they expect to pay.

Pricing is psychological.  Consumers are much more effected (make more irrational decisions) than companies, but companies do it as well.  Corporations have buyers, and these buyers are normal people with the same emotions as the rest of us.  They have been trained to be more rational, but in the end they are people.

If you are a B2C company, you absolutely must pay attention to the psychology of pricing.  It is not an option.  If you’re B2B, you should be able to focus more on delivering real value for the price, and justifying it with rational arguments.  Even so, don’t be surprised when your customers exhibit irrational behavior based on pricing psychology.


Mark Stiving, Ph.D. – Pricing expert, speaker, author

Photo by Thomas Thomas