Psychology of Price

S-O-R model

Stimulus Organism Response

Explains why a
customer responds
to a price in a
particular way
 Price Anchor Effects

Customers feel uncertain about their price judgement – they search for
a reference point – so-called ANCHORS
 The Magic of the Middle

Tendency of customers to pick a middle option

If customers do not know how much a product costs and have no clear
special needs, theywill gravitate towards a price in the middle.

$4 and $12

1. Reduces the risk of poor quality product

2. Reduces the risk of overspending
3. Customer avoid excessive search costs
 Which would you buy?

A small (350 ml)

$6.10
Medium (450 ml)
Large (610 ml)
$7.10
$7.50
 Assortment Effect
OFFER A OFFER B

Online $59 68 % Online $59 16 %

Print + Online $125 32% Print $125 0%

Print + Online $125 84%

 Price Threshold Effect

A price point which triggers a pronounced change in sales volume

whenever it is crossed.

1. Read digits in a price from left to right

2. Perceive them with decreasing intensity

9.95
 Price as a Quality Indicator
Price allows immediate objective comparisons among products.
Price signal of high credibility which the seller transmits.

▪ Brands and manufacturer names do ▪ Consumer’s self-confidence is low

not play a major role ▪ The greater the desire for a quick and
▪ First-hand experience is lacking or easy purchase, avoid cognitive
difficult dissonance
▪ Last purchase is in the distant past ▪ The greater the buyer’s purchasing
▪ Technical complexity power
▪ Absolute price is not too high ▪ The less knowledgeable the buyer is
▪ Time pressure increases
 Price Figure Effect

$ 4.32 ▪ Occur when customers perceive the ordering of the

price digits in a certain way.

$ 2.34 ▪ Do not perceive prices as whole, singular things, but

instead have a perception for each individual digit.

$ 4.44
▪ Example: Left to right comparison
 Price Shading Effect

• Reflect the translation or generalization of learned relationships which influence the way
the customer interprets how the price is presented.
• Visual presentation and communication of prices important.

Lowest price Rock Bottom Price

Crazy Low Price

• Signals scarcity
 OLYMPIC GAMES 2012

• Lowest (standard) price was £ 20.12 and the most expensive

ticket was £ 2012.
• Motto “PAY YOUR AGE” for children and young adults.
• No discounts available
• No ticket bundles
• The ingenious price structure and communication campaign
ultimately generated ticket revenues of £ 660 million (75 %
more than planned and preceding three Olympic games).
Thanks