Psychological pricing: A secret sauce to more sales


The last item I bought?

A 2-pack of hand-carved Himalayan salt lamps for $22.99. It seemed like the best deal because it seemed cheaper than buying one — even though in total I ended up spending almost twice as much money.


I made that choice after researching different combinations of lamps from different sellers on Amazon to find the best value.

In the end, I saved almost $9 from this 2-pack versus buying two separately. And I was pretty excited to finally get them (I'd heard of all the benefits of salt lamps).

When they arrived, I set them up and plugged them in, when suddenly...

One of them didn't work! (Well, it did, but I had to wiggle the wire a bunch to get it to turn on) So I left them a 1-star review. I'll never buy from that seller again.

Why am I telling you this story?

Because I learned a valuable lesson:

No amount of psychological pricing makes up for cheap products and poor customer service.

If you have a crappy product and came here hoping a price tweak would solve your problems, think again. Focus on quality first and price second.

If you have a superior product, you'll win more repeat customers over the long-run. Business, whether eCommerce or otherwise, is a long-term game. And investments, in your products and otherwise, are how you win that game.

Now, assuming your product is good, let's talk about how psychological pricing got me to buy one lamp over the others and won that company my business.

(And how you can use a psychological pricing strategy to win more customers yourself.)

What is a psychological pricing strategy?

Psychological pricing means pricing your products in a way that convinces people to buy, based on their mind's automatic beliefs.

It's unclear where the psychological pricing strategy came from. However, we know the practice arose sometime during the late 19th century with newspaper pricing competition.

Basically, businesses tested different pricing strategies and found the ones that worked best. Since then, we've applied psychology to these pricing best practices to understand why they worked so well.

In today's article, we'll dive into 4 psychology pricing strategies:

  1. The Left-Digit Effect
  2. Comparison Pricing
  3. The Expensive = Quality Effect

Let's dive in!

1. Use the Left-Digit Effect to Increase Conversions

I'm sure you've seen all the products available ending in ".99". This strategy is as old as pricing itself. Just look at the lamps I bought - $22.99.

Basically, the left-digit effect shows that people tend to read things from the left.

So, if you have an item at $29.99, it's perceived by the mind as a $20 item as opposed to a $30 item.

Like anything, it doesn't work on everyone all the time - I'm quite conscious of it myself - but it does work on some people some of the time, which is why it's so popular.

It's one of those "why not do it?" kinds of things. It can't hurt, but it can help.

I've seen the effects personally. My girlfriend falls pray to this effect all the time. She'll grab something that's $24.99 and say "Hey, this is only $20!". I can't help but laugh.

Action Item: Change the prices of your products to end in 9 or 5. So if something is $300, make it $299, etc.

2. Use the Comparison Effect to Sell More Mid-Range Products

The comparison effect plays on a concept in psychology called Anchoring.

Basically, when we see something (such as a price), that becomes the anchoring point for what we compare everything else to.

For example, Amazon always shows a comparison box on their product pages:


Now you can see how they got me to buy the lamps I chose - it was a better price.

However, there's more than price at play here. Notice the reviews - another lamp set was evenly priced, but had 0 reviews. Reviews play a big part in eCommerce.

In hindsight, I should have gone with the $29.99 pair because of the extra half star rating - I bet those didn't break as much. But a half star wasn't quite enough to sway me.

Back to the comparison effect. When I saw that this product seemed to be high-quality and was $7 cheaper than a seemingly identical product, I went for it.

But there's a better way to use this pricing psychology strategy. Let me give another example...

In a study published by The Wall Street Journal, we learn that Williams-Sonoma had a $275 bread maker in their catalog that wasn’t performing too well.


When they introduced a similar bread maker for $429—which was only marginally better—and placed it next to the $275 bread maker in a print ad, sales for the $275 bread maker skyrocketed and almost doubled.

"The lesson learned here: When you’re launching a new product or service in the market, consider leveraging relative pricing. Create a tiered product strategy like Williams-Sonoma or try offering a discount for a longer commitment (for example, 25% off if you make a yearlong commitment). Remember that people don’t make decisions in a vacuum and price your product in a way that takes advantage of that."

In the Williams-Sonoma example, consumers may have said, "I don't know much about bread machines, but if I can buy the $275 model that's almost as good as the $415 model, then I must be getting a good deal."

This is a prime example of Anchoring! They see the high price machine at $429, then the one next to it at almost half the cost, and anchoring causes them to believe it's a great deal and pushes them to buy.

Action Item: Price your product collections with comparison pricing in mind. Introduce a more “premium” version of your product and see if the normal version sells more. Better yet, compare three versions with the middle being the clear winner.

3. Use the "Expensive = Quality" effect to increase your profits

Most of us grow up with one core belief about price:

You get what you pay for.

You hear this all the time, right? I bought the cheapo $22.99 lamps instead of the "premium" $29.99 version and I certainly got what I paid for.

The phrase is so often true that our minds have turned it into a default belief. When we're going mindlessly through our day, rather than thinking deeply about price, we often see a high price and assume it's also high-quality.

This is normally a good assumption. And so you can use it to your advantage.

Let's look at another example:

In his best-selling book The Psychology of Persuasion, Dr. Robert Cialdini shares his insights on this phenomenon. He shares a story of a woman who owns a jewelry shop that sells mainly to tourists.

Normally during the tourist season she does quite well. However, one display just won't sell no matter what she tries. So, out of frustration, she left a note for her assistant to cut the price of that display in half and she left on a few days vacation.

Everything in this case 1/2!

However, in her hurried handwriting, the assistant thought she wrote "x2" (the "1" and the "/" were written to look like a times symbol). She doubled the prices.

What happened next is remarkable...

She completely sold out of the jewelry in the display at twice it's normal price!

How can this be? In the words of Dr. Cialdini...

The customers, mostly well-to-do vacationers with little knowledge of turquoise, were using a standard principle—a stereotype—to guide their buying: “expensive = good.”

So what's the takeaway from this story?

Action Item: Try raising the prices of your products, rather than lowering them to beat the competition. (Just, please, don't sell crappy products.)

4. Use buy one get one (BOGO) deals to tempt shoppers into buying expensive items

There are all kinds of product bundling price strategies, but a super simple one is a buy one get one (BOGO).

In the UK, these deals were so effective that the government considered banning them because they were leading to millions of tons of wasted food and increased obesity.

These deals are effective because they give shoppers a great deal on some products in the bundle without actually giving a huge discount on your end. 

The following table calculates the discount you eat on the total order value for each type of BOGO if all the products you're offering are the same price.

BOGO offer type Discount on total purchase
Buy one get one free 50%
Buy one get one half off 25%
Buy one get one 40% 30%
Buy two get one free 33%
Buy three get two free 40%
Buy three get three free 50%

But here's the thing: the discount you give gets even smaller the less expensive your "get one" product is.

So let's say your BOGO is to buy a jersey and get 50% off a hat. Your jerseys are $175 and your hats are $25.

This could make buying the jersey much more enticing to shoppers, but you're only giving a $12.50 discount off a $200 purchase — that's actually only 6.25% off the total order.

Action item: Try doing a BOGO offer across collections with a significant price difference (jacket and mitts, eyeshadow palette and lip liner). For the "get one half-off" product, use something that's considerably cheaper than the "buy one" product to tempt shoppers into purchasing bigger-ticket items. E.g. Buy this $1000 espresso machine and get these $100 set of espresso mugs 50% off.

Bringing it all together

Using a Psychological Pricing Strategy can and will increase your online sales. It got me to buy one company's salt lamps over another's, and I'm sure it's effected me (and you) countless other times.

Try out these strategies on your own store. Drive some traffic to your product pages and test different prices to see what works best. Add comparison products and don't be afraid to double your prices.

Then, come back here and share your results!

What pricing strategies will you try after reading this? Let us know in the comments below!


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Bill Widmer

Written by Bill Widmer

Bill is an eCommerce content marketing and SEO consultant. He's run several stores and worked with many well-known brands including A Better Lemonade Stand, SaleHoo, and Lifehack.

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