This type of pricing uses psychological tactics to give the impression that the price of a product/service is lower then it actually is. Firms will not charge a whole number for their product but opt to choose slightly less then a whole number in order for the product to seem much cheaper than it is . For example a firm may charge $14.99 instead of $15.00
Psychological Pricing Theory
Psychological pricing is based on the theory that consumers want to pay as little as possible for a product. So it attempts to create pricing strategy which attempts to create a perception in the consumers mind that they have paid a lot less for a product than they actually have.
Benefits of psychological Pricing
Psychological pricing will help develop a positioning strategy that that may help the firm to develop a certain image.
Popular pricing strategy used to help promote the product.
It may prompt people to buy when they were unsure about doing so.
It widens your target market as people who were looking to spend below $15 may also consider the product.
Psychological Pricing Disadvantages
Not all target groups will fall for this strategy
Psychological pricing helps an organisation develop a certain image and positioning strategy for the company. Psychological pricing has many advantages. A firm that uses psychological pricing, will probably use it in conjunction with other pricing strategies.
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