An effective method for pricing product or service to increase revenue with little or no effort is

psychological pricing.

Psychological pricing is a strategy used in marketing based on theory that consumer would be
affected by certain prices than others, and mentioned here is “charm pricing”, which reduce the left
digits by one.

This strategy can be used in differents ways but most common is ending the price with “9” and
“99”. With charm pricing the left digit is reduced from a round number by one cent.

Business should take advantage of this strategy for following reasons.

First, our brain processes $300 and $299 as different values: to our braind $299 is $200, which is
cheaper than $300. It is effective because, as research on this in 2005, Thomas and Morwitz conducted
research they called “the left-digit effect in price cognition.” They explained that, “ Nine-ending prices
will be perceived to be smaller than a price one cent higher if the left-most digit changes to a lower
level(ex: $3.00 to $2.99), but not if the left-most digits remains unchanged(ex: $3.60 to $3.59)

Second, this tactics encourage customer to buy more. For example, on e-commerce site
customers always engaged with multiple discount (20% or free-shipping for order that meet certain
conditions – above 200$ for instance). But the problem here is the price of customer desired product is
only 199$ so they have to buy more to meet the discount conditions, which results in increase in sale.

But this strategy does not always work well, especially in luxury sections. Contrast to this
strategy, prestige pricing involves making all numerical values into rounded figures, $99.99 to $100 for
example. According to Kuangjie Zhang and Monica Wadhwa in a 2015 study, “rounded numbers (e.g.,
$100) are more fluently processed and encourage reliance on consumers' feelings, compared to non-
rounded numbers (e.g., $99.99), which are less fluently processed, and encourage reliance on
cognition.” They realized that customer were more intend to buy a bottle of champagne when it was
priced at $40.00, rather than $39.72 or $40.28.

In addition, there are some pricing marketing strategy based on psychological impact the price
might have on consumers. First, the “BOGOF”: Buy one, get one free. The strategy encourage customer
pay the full price for one product or service to get another for free, which focus on the greed of
customers. Second, the comparative pricing, which places the expensive product next to the standard
one. This simply involves offering two similar products but making one price much more attractive than
the other.