Ever wondered why something costs ₹99 instead of ₹100? Or why do you often see offers like “Buy 1 Get 1 Free”? These pricing strategies aren’t random—they’re carefully crafted psychological tricks used by big brands to influence your purchasing decisions. Let’s break down how brands use psychology to set prices and why these tactics work so effectively.
1. Charm Pricing: The Power of ₹99 vs. ₹100
One of the oldest and most effective pricing tricks is charm pricing. It’s when a price ends in “9” instead of a round number. For example, a product priced at ₹99 looks significantly cheaper than ₹100, even though the difference is just ₹1.
Why It Works:
- Left-Digit Effect: Shoppers focus on the left-most digit. So, ₹99 feels closer to ₹900 than ₹1000.
- Perception of Value: It makes the product feel like a bargain, even if the price difference is minimal.
- Emotional Impact: Odd numbers, like ₹99, are subconsciously perceived as discounted prices.
Real-Life Example:
- Big Brands Like Apple and Zara: Apple prices many of its products at ₹99, ₹49, or ₹79. Zara’s clothes often end with .99, creating a perception of affordability.
How You Can Use It:
- Price your products ending with “9” or “.99” to attract price-sensitive customers.
2. Anchor Pricing: Setting a Reference Point
Anchor pricing is when brands show a higher original price next to a discounted price to make the deal look more appealing. The original price acts as an “anchor,” making the discounted price seem like a steal.
Why It Works:
- Psychological Reference: Shoppers use the higher price as a benchmark to judge the value of the product.
- Perceived Savings: Seeing a higher crossed-out price makes people feel they’re getting a great deal.
Real-Life Example:
- E-commerce Platforms like Amazon and Flipkart: They often display the original price with a slash and highlight the discounted price. For example, “Original Price: ₹2000, Now: ₹1500”.
How You Can Use It:
- Always display the original price alongside the discounted price to highlight the savings.
ALSO READ | Inflation in 2025: What It Means for Your Money & Lifestyle
3. Bundling: Creating the Illusion of More Value
Bundling involves selling multiple products together at a slightly lower price than buying them individually. For instance, a shampoo and conditioner pack priced at ₹200 looks more attractive than buying them separately for ₹110 each.
Why It Works:
- Perception of Value: Customers believe they’re getting more for their money.
- Convenience: Bundles make purchasing decisions easier by reducing the need to compare individual prices.
Real-Life Example:
- Fast-Food Chains like McDonald’s: Their meal combos (burger, fries, and drink) are cheaper than ordering each item separately.
- Software Companies like Microsoft: They bundle products like Word, Excel, and PowerPoint into the Office suite.
How You Can Use It:
- Create product bundles that offer a slight discount compared to buying items individually.
4. Decoy Pricing: Steering Customers to the Most Profitable Option
Decoy pricing involves introducing a third option that makes one of the other options look more attractive. For example, offering small, medium, and large popcorn sizes, where the medium size is priced close to the large size to make the large option look like a better deal.
Why It Works:
- Comparison Bias: Customers tend to compare prices side by side and choose the option that seems to offer the best value.
- Boosts Profits: The decoy option pushes customers toward a more profitable choice.
Real-Life Example:
- Movie Theaters and Coffee Shops: You’ll often see three pricing options, with the middle option being a decoy to encourage buying the largest size.
How You Can Use It:
- Offer three pricing tiers to make your desired option look more appealing.
5. Free Shipping: The Power of Zero
Customers love free shipping. In fact, many people are willing to spend more money just to qualify for free shipping.
Why It Works:
- Psychological Impact of “Free”: The word “free” triggers an emotional response, making the offer seem irresistible.
- Increased Cart Value: Shoppers often add extra items to their cart to qualify for free shipping.
Real-Life Example:
- Amazon’s Free Delivery Threshold: Amazon offers free shipping for orders above a certain amount, encouraging customers to spend more.
How You Can Use It:
- Set a minimum order value to qualify for free shipping and watch your average order value increase.
ALSO READ | Why India is Becoming the Next Big Hub for Startups
6. Psychological Pricing in Action: Real-World Brands
Many well-known brands use these psychological pricing tactics to boost their sales:
- Apple: Uses charm pricing and anchor pricing.
- McDonald’s: Masters bundling and decoy pricing.
- Amazon: Leverages anchor pricing and free shipping offers.
These strategies aren’t just for big brands. Small businesses can use them too!
Why Psychological Pricing Works
These pricing strategies work because they tap into human psychology. Shoppers don’t make purely logical decisions—they make emotional ones. By understanding how people perceive prices, brands can influence purchasing behaviour and increase sales.
Key Psychological Triggers:
- Perception of Value: Making customers feel like they’re getting a good deal.
- Emotional Triggers: Using words like “free” or showing discounts to evoke positive emotions.
- Cognitive Biases: Leveraging mental shortcuts that people use when making decisions.
How Small Businesses Can Apply These Strategies
You don’t need a big marketing budget to apply these pricing tricks. Here are simple ways to get started:
- Use Charm Pricing: Price your products at ₹99 or ₹49 instead of round numbers.
- Offer Bundles: Create value packs that encourage customers to buy more.
- Display Discounts Clearly: Show original prices next to discounted ones.
- Introduce a Decoy Option: Add a middle pricing tier to nudge customers toward a profitable choice.
- Set a Free Shipping Threshold: Encourage customers to spend more to qualify for free shipping.
Final Thoughts
Pricing is more than just numbers—it’s a psychological game. Big brands use tactics like charm pricing, anchor pricing, and bundling to influence our decisions. By understanding these strategies, you can apply them to your own business and boost your sales.
Download the ffreedom app today and access expert-led courses on business tips and entrepreneurial insights. Also, subscribe to our YouTube channel for regular updates and practical tips. Your dream business is just a click away—get started now!
