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Psychological Pricing

Psychological pricing or price ending is a marketing practice based on the theory that certain prices have a psychological impact.

Learning Objective

  • Apply the discipline of psychology to pricing


Key Points

    • Psychology is an academic and applied discipline that involves the scientific study of mental functions and behaviors.
    • While psychological knowledge is often applied to the assessment and treatment of mental health problems, it is also directed towards understanding and solving problems in many different spheres of human activity.
    • Psychological pricing can be used to increase the perceived value of a product as well.

Term

  • psychological pricing

    Psychological pricing or price ending is a marketing practice based on the theory that certain prices have a psychological impact.


Full Text

Psychological

Psychology is an academic and applied discipline that involves the scientific study of mental functions and behaviors. Psychology has the immediate goal of understanding individuals and groups by both establishing general principles and researching specific cases and, by many accounts, ultimately aims to benefit society. In this field, a professional practitioner or researcher is called a psychologist, and can be classified as a social, behavioral, or cognitive scientist. Psychologists attempt to understand the role of mental functions in individual and social behavior, while also exploring the physiological and neurobiological processes that underlie certain cognitive functions and behaviors.

While psychological knowledge is often applied to the assessment and treatment of mental health problems, it is also directed towards understanding and solving problems in many different spheres of human activity. The majority of psychologists are involved in some kind of therapeutic role, practicing in clinical, counseling, or school settings. Many do scientific research on a wide range of topics related to mental processes and behavior, and typically work in university psychology departments or teach in other academic settings (e.g., medical schools or hospitals). Some are employed in industrial and organizational settings, or in other areas such as human development and aging, sports, health, and the media, as well as in forensic investigation and other aspects of law.

Psychological pricing or price ending is a marketing practice based on the theory that certain prices have a psychological impact. The retail prices are often expressed as odd prices: a little less than a round number, such as $19.99 or £2.98. The theory is that this drives demand greater than would be expected if consumers were perfectly rational.

Psychological pricing can be used to the perceived value of a product up as well. By charging $350 for designer jeans, retailers are at times able to create more demand for the product than if they were priced at $19.99 for example.

Stop & Shop Price Cruncher

A British Stop & Shop ad from the 1994 holiday season, informing consumers what they would save on the purchase of each item.

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