What is Physchological Pricing?
It is a Pricing / Marketing strategy based on the theory that certain prices have a psychological impact.
Pyschological Pricing is one cause of price points. Price Point is prices at which demand for a given product is supposed to stay relatively high.
There are three techniques in Pyschological Pricing techniques:
1) Prestige Price
The strategy of consistently pricing at, or near, the high end of the possible price range to help attract status-conscious consumers. The high price of premium product is used to enhance and reinforce a product's luxury image. Examples of companies which partake in premium pricing in the marketplace included Rolex, Bentley and Porsche.
The issues of prestige pricing: Consumer believe the high price is an indication of goog quality. They believe it to be a sign of self-worth - "They are worth it", it authenticates the buyer's success and status, it is a signal to others that the owner is a member of an exclusive group. They require flawless performance in this application - The cost of product malfunction is too high to buy anything but the best - example: heart pacemaker.
2) Odd Even Price
Set the price a few dollar or cents below a round number. Pyschological Pricing method based on the belief that certain prices or price ranges are more appealing to buyers. Example: McDonald advertises a set of McValue Lunch and Dinner for RM5.95.
The issues of odd even pricing: Instead of charging $20, charging $19.95 for a product makes the price appear to be in the "teen ranges" rather than the "twenty ranges". Thus, customer perceives the price to be lower than it actually is. Most people are not electronic calculators and having to add up loads of numbers like $14.99 is surely a big amount of trouble.
3) Bundling Price
Combining several products or services into a single comprehensive package for an all-inclusive reduced price. Pursuing bundle pricing strategy allows the business to increase your profit by giving customer discount. Example: A hotel quotes a rate for an over-night stay that includes breakfast in the morning.
The issues of bundling pricing: Discount on bundled services don't last forever. The discount earned by bundling is part of a promotion to attract new subscribers to the product. Once, the promotional period is over, the price increase and the customers lose their saving. In some television channel, the unnecessary channel might be included as it would be the channel that consumers don't like the most.
THE CONCLUSION IS DO NOT EASILY INFLUENCE BY THE PRICING PSYCHOLOGICAL TECHNIQUES!
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