Charm pricing (or psychological pricing) is a pricing strategy that tricks consumers into thinking they are getting a good deal. Charm pricing relies on the belief that a price can trigger emotional reactions in people. Let’s look at this example to make things easier. A glass jar costs $3.99, but the consumers’ brains think of it as 3 dollars and not 4 dollars, treating $3.99 as a lower price than $4.00.
That is why this is a powerful strategy and requires efforts from everybody in your company (pricing, marketing, and sales team) to be executed perfectly. The best thing about charm pricing is that any retailer can apply it to their store if they follow the correct steps.
So, what is the history behind psychological pricing, and how did it become so popular? In 1997, a study by Marketing Bulletin discovered that the most-used cent endings retailers used were odd numbers (9 accounted for 60% and 5 for 30%). There are many causes, according to the same investigation, why sellers use odd pricing in their companies.
The first one is that, for example, customers see a price of $4.99 as being closer to four dollars than five dollars. The second one is about the consumer's memory. Since they are exposed to a lot of pricing information, they only recall the first digit. So, if they see a price of $5.99, customers will remember that it is $5 or even $5.90. The last reason is that consumers view odd pricing as the lowest possible price. Now that you know what charm pricing is and its history, it is time to see the advantages that this pricing strategy brings to your business.
1- Better understanding of the market
Before your company implements the psychological pricing strategy, you must research your competitors (products’ prices and strategies). If you have that information, you will have insights into your market and competitors that will be helpful in the future. But we know that manually doing these tasks takes a long time and can be tedious. PriceTweakers makes your job easier, more enjoyable, and faster because it does it automatically.
2- Increases your profits
Charm pricing helps you increase your profits during peak seasons or promotions. The strategy attracts more customers. Also, if you release a new product, you can price it higher when the demand is high. Just like that, you will have a higher return.
3- Attracts more customers
As mentioned above, customers cannot resist the .99, and studies prove it. Retailers use this tactic and work to perfection for them because it tricks clients. They think they are getting the better end of a deal. That will gain their attention and have them turn to your products.
Conclusion
Charm pricing works to perfection when applied correctly because consumers always want to get the best deals when purchasing an item, and this pricing strategy is perfect for that. It is a powerful strategy that will help your business grow. With PriceTweakers, you can create a psychological pricing strategy and many more. Plus, you can customize it to your preference. Also, we will monitor your competitors, another critical aspect of pricing strategy creation, and will save you time in doing your tasks.
