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 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.
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.
