Embrace the logic of psychological pricing

$4.99 converts 4.67% and $5.00 converts 3.84%

It is not so much a pricing strategy as a pricing tactic, but the use of the number ‘9’ is common in pricing products to sell. One study found that:
  • $4.99 led to a conversion rate of 4.67%
  • $5.00 led to a conversion rate of 3.84%
  • $2.99 led to a conversion rate of 3.44%
  • $3.00 led to a conversion rate of 2.11%
It might seem counter-intuitive, but despite the logic that there is little difference (and in the absence of one cent coins there is no effective difference) between $4.99 and $5.00, conversion rates are significantly higher when the price is $4.99. This is just one of many examples of how the number 9 can influence purchase behaviour. The use of the number 9 is just one of the many psychological considerations in pricing.

Other interesting psychological pricing tactics include:
  • Prices without commas are viewed as cheaper than those with comas
  • A price involving fewer syllables is seen a less than one with many syllables
  • A price displayed in a small font is considered less than one in a big font
There are many more.

Psychological pricing is defined as a marketing strategy where prices are expressed in a way that appeals more to consumers. It is pricing that appeals to consumer emotions. Psychological pricing strategies recognise the profound impact that psychology has on how consumers look at and respond to prices and how those prices are expressed. Examples of psychological pricing are provided in the articles that follow.
Psychological pricing offers a number of benefits:
  • Directly addresses and simplifies the decision-making process
  • It can make it difficult for competitors to enter a market
  • It has the greatest possible chance of maximising margins
There are also disadvantages to psychological pricing, including:
  • It requires a great deal more time and energy
  • If managed poorly it can adversely affect a brand
  • It is not an exact science and results are not guaranteed
Beyond this, it is sobering to note that psychological factors impact on purchase behaviour even in the absence of a strategy. Having a strategy simply serves to help manage the psychological factors. Given that psychology cannot be avoided, it is wise to manage it.

All things considered, however, psychological pricing has the greatest potential to leverage the psychology that is already happening and maximise profitability. While psychological pricing may not be used exclusively, it is a critical consideration in every optimal pricing strategy.


Make psychological pricing part of your pricing strategy. Psychology is going to impact on decision making anyway, and it is better by far to manage than to ignore that psychological effect.

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