Psychological Pricing

Thesis Statement

The purpose of the paper is to describe and research about the pricing strategies, and the pricing tactics that has been observed in the surroundings. Furthermore the paper will explore and review various pricing strategies of the different products and services categories. The paper will articulate the concept of psychological costing, which will also exhibit the willingness of a consumer to pay, and how intact they emotional are with respect to the pricing of the product.

Introduction

The fact on which the manufacturer believes is that consumers are prone to their own perception, they believe what they see, however, when it comes to pricing they usually respond faster to the lower price first. Psychological pricing is defined as the marketing practice which is based on specified theory, in which certain prices have a psychological impact on the consumer. This pricing strategy is also known as price ending or charm pricing. Psychological pricing is a business concept which is supported by the idea, that the customer would more likely to respond to certain types of pricing in a better state, and will buy the particular item more with these prices. Referring to the Psychological pricing, which is frequently termed as the “retail price” or “odd price,” are those prices which are not in a round figure, for instance the prices like $19.99 or £2.98. Consumers habitually have their perception that the odd prices are significantly less than spending the round figured price such as $20. Thus, consumers, paying prices such as $1.99, psychologically believes that they are actually spending $1 rather than spending $2 on a particular item. Such strategies in pricing may end with the digit nine “9”, which is perceived by the customer that they are paying relatively less and saving more on what they are buying. For some companies, pricing at $19.99 as an alternative of at $20 US Dollars (USD) will make the consumer believe that they are being offered a discount/saving, and even if that savings is only one penny, customers may experience more confidence and may be more convinced about making a purchase. There are many examples of retailers, who have adopted this strategy and have experienced a great success. Looking back in late 19th century, the salesman of the newspaper started off by adopting this strategy, and be able to sell all his allotted newspapers on daily basis. In early 20th century, a walk into the biggest retail store in States which is Wal-Mart will divulge many examples of the psychological pricing, in which every products price ends at 0.99 or 0.49 USD.

Background

Psychological pricing or the odd pricing strategy was introduced long time back as a tactic of marketing; the strategy was designed in 19th Century, considering it a way where the marketers tends to play with the consumer's psychic, in order to make the product price fall in the range of the lower band of prices. Pricing strategy is a phenomenon that helps in creating a positive impact on the psychology of the ...