psychological pricing

psychological pricing

an approach to PRICING which pays particular attention to the effect which a product's PRICE has upon consumers' perceptions of the product. This has a number of dimensions, including:

1. the charging of very high prices for certain (generally high-quality) consumer products to convey an impression of product exclusiveness. High prices may appeal to particular high-income customers who wish to possess the product as a status symbol (‘conspicuous consumption’);
2. the charging of high prices for technologically sophisticated consumer products in order to convey an impression of superior product quality and performance.

   This may play an important part in the buying decision when consumers are ignorant about the comparative properties of the brands of the product facing them, and thus use price as an indicator of quality;

3. the charging of a price for a product which is just below a ‘round figure’ threshold price (for example 99 pence rather than £1) so as to create an impression that the product's price is considerably below the threshold;
4. the charging of relatively low prices for frequently purchased and familiar products so as to create or reinforce an impression of value for money.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson