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Thursday, August 6, 2015

Psychological Pricing Strategies in E-commerce

As e-commerce business gradually replaces traditional offline retail sale, there is a battle between online sellers of attracting customers to their site and buy their products. Among various strategies, psychological pricing is the easiest way that owners decide to try first hand.
In this paper, I will focus on psychological pricing strategies which are similar to traditional offline ones.

1. Bundling product to ease online shopping pain:
bundling product.jpg
Bundling product is a strategy which requires customers to buy a several products as a combined product. And if customers purchasing bundled products, they will get them at a cheaper price than buying separately.
This would create benefits for both consumers and sellers.
For example, when you see another item attached with your first selected item, you will probably take the deal.
For the sellers, by bundling products, they can reduce the extra inventory on hand without leaving them unsold and damaged by time. In this situation, the best strategy for them is to bundle related products, for instance, a mp3 player with a pair of headphone.
2. Comparing sale price
compare sale price.jpg
People always prefer purchasing a product at with less money than its original price requires.
Display the sale price next to the original one.
To achieve the best sale, you should be clear about your product margins. Don’t make too close or too far sale price. If your sale price is too low, customers will certainly expect much lower price or might think that product’s quality does not match their expectation. Even if they go ahead with the purchase, you will end up making a tiny profit.
3. Ending price with number nine
ending 9 price.jpg
This is not lost on anyone who has seen rows on rows of $0.99 candy bars in a convenience store. The number nine does a great job convincing customers they are getting a deal.
Even though it is not the cheapest option, the $39 dress sold best. This is because buying this dress makes customers felt they were getting a steal on a $40 dollar dress, whereas buying the $34 dollar dress felt like overpaying for a $30 dress.
Simply because $34 is closer to $30 and $39 is closer to $40, customers create those reference points to judge the value of their purchase.
That’s not the only way retailers can get cute with their pricing. Ever notice the difference in font size between the dollars and cents on the billboards promoting Burger King’s new meal deal? That “.99” is tucked up in the corner in a tiny font in order to make you forget it even exists.


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