Advantages and Disadvantages of Psychology Pricing

Psychology pricing is the pricing technique used in marketing by the sellers to lure customers towards their product or service by exploiting the psychology of the customer. So for example companies setting the price of product or service at $49.99 instead of $50 or $99.99 instead of $100 are examples of psychology pricing. In order to understand this concept better let’s look at some of the advantages and disadvantages of psychology pricing –

Advantages of Psychology Pricing

  1. The first and foremost advantage of psychology pricing is that it helps company in generating more sales because a product which is priced at $100 will result in lower sales as compared to that product which is priced at $99.99 because in the minds of the customer this 1 cent convert the product from 3 figure priced product to 2 figure priced product.
  2. Another merit of this pricing is that in this competitive world where everything counts a company can use this psychology pricing to its advantage because if two competitive products are priced at $100 and both have almost same features than if the company uses psychology pricing than it can attract customers towards the company from its competitors.
  3. In this digital age where everything is searched on internet and products and services are no exception and when people search on internet they usually do it for products under $100 or products under $10 and so on and if the company has priced the product at $100 then company’s product will not be visible to large section of consumers who are searching for products under $100 which in turn will lead to lower reach and consequently lower sales for the company.

Disadvantages of Psychology Pricing

  1. The biggest disadvantage of psychology pricing is that companies tend to pay attention to psychology of the customer rather than their own product or service and if the quality of their product is not up to the mark than this strategy will not yield the desired results, hence in simple words a good product can sell without psychology pricing also while a bad product will not sell with this pricing strategy in the long run.
  2. Another demerit of this pricing is that due to the advent of technology consumers have become more informed and if company is thinking of luring the customers by adopting psychology pricing then they are wrong because nowadays customers do not see only the price rather they compare all things over internet like features, brand name, customer reviews and so on and then they purchase the product.
  3. Another limitation of this pricing is that as long as customer is paying through methods like debit card, credit card, internet banking then there is no problem but those consumers who are paying for product in cash then problem of change comes as not all shopkeeper have change which results in customer paying $100 even when price of product is $99.99.

As one can see from the above that psychology pricing has both merits, as well as demerits and any company thinking of adopting this strategy, should carefully analyze above points and then taken the decision whether to adopt psychology pricing for company’s product or service or not.

0 comments… add one

Leave a Comment


Related pages


what are fictitious assetscpi acronymbenefits of autocracydisadvantages of venture capitaldifference between cheque and draftadvantages of authoritarian leadershipcashless society advantages and disadvantageshypothecation and mortgage differenceclean bill discountingmanufacturing overheadswhat is an example of a vertical mergerstrengths and weaknesses of market economyadvantages and disadvantages of forecastingpricing skimmingwhich of these is an example of indirect taxwhat is slr and crrsubstitutes complementswhat is oligopoly and monopolyrelevant cost managerial accountingadvantages of unrelated diversificationhow to calculate crrimplicit cost and explicit costdefinition of unsystematic riskfree market economy advantages and disadvantages pdfbarter trade systemasset revaluation journal entrycomplementary and substitute goodsdifference between accounts receivable and bills receivablemarginal costing in cost accountingprepaid expdistinguish between normal and inferior goodsadvantages and disadvantages of process costingadvantages and disadvantages of publicity in marketingfinancial derivatives pptdefinition of chequesadvantages and disadvantages of communist economic systemadjusting entries for prepaid expensessubstitute and complementary goodseconomic systems advantages and disadvantagesgoodwill journal entryplanned economy advantages and disadvantagesmerger and acquisition advantages and disadvantagesveblen goods exampleswhat are disadvantages of globalizationorder and bearer chequemerger horizontalproduct bundling pricing exampleforex direct quoteimportance of horizontal analysisnet worth calculation formula for a companymerits of cost accountingbills discounting meaningadvantages and disadvantages of traditional bankingwhat does consignee meanadvantages of fifo methodexample of diminishing marginal utilityreal world example of monopolistic competitioncommand economy advantages and disadvantagesunclaimed dividend definitiondurable and nondurable goods exampleswhat are the disadvantages of commodity moneyfdi full formpenetration pricing strategyadvantages and disadvantages of authoritarian leadershipdecentralisation advantages and disadvantagesadvantages and disadvantages of deforestationaccounting ebitwhat is sundry assetsdisadvantages globalizationadvantages of carbon creditsdisadvantages of cost accountingwhat are the disadvantages of budgeting