In the world of online retail, understanding how to run successful promotions and strategically price products takes more than just an Economics Supply and Demand course. Humans have an innate inclination to respond to certain types of prices, this is what we call psychological pricing.
The psychology of pricing and discounts for e-commerce are proven to increase the quantity a customer purchases as well as the dollar amount. Today, I’ll share a few tips on how to price and discounts your products to incline customers to spend more.
But it’s free
Just the word free gets customers all excited, even the ones who weren’t planning on spending anything in the first place. By offering buy one get one free, you’re catching the customer’s attention – even though we all know there is no such thing as a free lunch, the buy one get one free concept (also known as BOGO) really impacts the purchase behavior of a customer.
Another “free” tactic is offering free shipping. The price you see is the price you pay mentality really influences online shoppers. Knowing that you won’t have additional fees added during checkout motivates a customer to move forward with the purchase.
The charming #9
Major online and offline retailers like Walmart make use of what I like to call the charming number 9 concept. Today it seems like almost every price we see online ends with .49, .99, .98. This is what psychologists call the “left digit effect” where consumers tend to only focus on the dollar amount and instead of rounding up, they round down. For example, an item that you price at $49.99 psychologically means $49.00 to a customer instead of entering the “expensive” $50.00 price range. By ending your pricing with 9’s, you are appealing to shoppers who might not even be looking for a discount – the idea that the price isn’t a round number tends to suggest that item is on sale even when it’s not.
Increase value for the same price
Believe it or not, consumers prefer to get more for the same price than to get a discount on the product. This is why you often see “33% more” on hygiene and food products. Psychologically, the 33% more for free sounds better than a 33% discount off the products price.
Odd pricing are the dollar prices that you don’t see too often and end with 5, 7, 8 or 9. This type of pricing makes it seem like the retailer carefully calculated the price of the product. Using this pricing makes customers think that the price was a strategy to offer a fair price for the customer and the retailer, marking the product down to the lowest possible price. Prices such as $9.95, $9.97, $9.98 and $9.99 are used instead of making the price $10. This technique works when discounting products as well, slashing a price from $49 down to $38 is much more effective than $49 down to $40.
Find what works best for you
It’s a good idea to run AB testing to check and see which pricing and discounts trigger your customers to purchase the most. Test out different techniques from time to time to see if your customers’ purchase behaviors change. PrestaShop users will be happy to find various pricing rules and promotion modules to assist with your sales in PrestaShop’s Official Marketplace and native in the software.