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At the end of the day, price is merely a perception. When people compare your price to a reference price, you can influence them to pull a lower price into that comparison. Because our brain is lazy. Thus the numerical price pay to get psychology presentation susceptible to the influence of its original context when people attempt to reconstruct it later.

Charm pricing is most effective when the left digit changes. Our brains encode numbers so quickly and beyond consciousness that we encode the size of a number before we finish reading it. Bonus Tip : You could pay to get psychology presentation the new base digit by visually minimizing the digits after pay to get psychology presentation decimal. And that principle applies to numbers. If we expend a larger amount of mental resources to process a number, we falsely infer that the magnitude must be larger.

When you read a price in written form, your brain nonconsciously encodes the auditory version Dehaene, Even if two prices have the same written length e. In a layout, position larger elements around your price.

The reverse works for discounts. Researchers found that removing commas e. Why does that happen? We already discussed it. Can you think of it? Be careful when choosing the language near your price. For example, Coulter and Coulter presented participants with various descriptions for an inline skate. Hossain and Morgan tested that possibility with eBay auctions. They set up auctions for music CDs, and they analyzed different bidding structures.

Likewise, when you give people the option to pay for your product in smaller increments rather than one lump sumyou anchor people on the smaller price. By offering payment installments e. So your installment price has a good chance of sneaking into their comparison. Similarly, you can reframe your price into its daily equivalence e. You should still make your regular price the primary focus.

Simply mention the daily equivalence. That low number will anchor people toward the lower end of the pay to get psychology presentation spectrum. Thomas, Simon, and Kadiyali analyzed 27, real estate transactions. Is it because of pay to get psychology presentation negotiation aspect?

Researchers ruled out that possibility. Surprisingly, the real culprit involved priming a small magnitude. When are you more likely to pay to get psychology presentation precise values? When determining the numbers in your price, you should also consider processing fluency. And our brain misattributes that pleasantness to the context. When designing a layout, you should position your price toward the left Coulter, The same applies to numbers.

Dehaene, Bossini and Giraux found that people conceptualize numbers on an imaginary horizontal line, with numbers growing larger from left to right.

In their study, they presented participants with digits ranging from 0 and 9, and they asked participants to indicate its parity i. As expected, people responded faster to smaller numbers when using their left hand and vice versa. That congruence will increase processing fluency.

Lastly, we focused on horizontal direction. This tactic is pretty neat. However, people evaluated the other two ads more favorably. Stored number facts enable a child, and later an adult, to respond effortlessly to simple arithmetic problems. The price simply felt right. They misattributed that ease and pleasantness with the attractiveness of the offer. Read article that insight for your own product.

Wherever you display your price, incorporate multiples of that price: One caveat: include two — and only two — multiples.

Wadhwa and Zhang that round prices — because they are fluently processed — work better for emotional purchases. Consumers need to use more mental resources pay to get psychology presentation process non-rounded prices. So those prices seem more fitting with rational purchases.

Even if your purchase context is emotion-based, you should still avoid rounded price intervals e. So where can roundedness help? That principle can help you determine whether to add cents to your price. Similarly, prices that contain cents digits e. We all possess an innate self-centeredness. We subconsciously gravitate toward things that resemble ourselves — including the letters in our name or the numbers in our Some researchers suggest that we make important life decisions based on that principle.

People named Dennis are more likely to become dentists, and people named Louis are more likely to live in Best essay ghostwriters hire. The researchers used fMRI pay to get psychology presentation analyze their brains while they shopped for online products.

Turns pay to get psychology presentation, the first exposure — price vs. When products were displayed firstparticipants based their purchase decision on the product qualities. When prices were displayed firstparticipants based their purchase decision on the economic value. If you sell luxury products, you want people to base their decision on your product qualities.

Thus, for luxury products, show the product, and THEN show the price. Participants were more likely to buy those products if they encountered the price first. With that exposure, people were more likely to appreciate the economic value of the purchase.

More importantly, because men associate red prices with savings, they relied more heavily on that belief. Those findings also align with my research on color. The past two strategies helped you lower the perceived magnitude of your price. However, you can achieve the same effect by maximizing the perceived magnitude of reference prices. That pay to get psychology presentation number establishes an anchor point, pulling the final settlement closer.

Not only should you start with a high initial price, but you should also use a precise value. X units of adjustment along a fine-resolution scale will cover less objective distance than the same number of units of adjustment along a coarse-resolution scale. When creating your auction, you can generate more revenue by establishing a high reserve price — a price that needs to be met in order for the item to be sold.

Given our tendency to assimilate toward an anchor point, could exposure to high prices — even for unrelated products pay to get psychology presentation anchor people toward the higher end of the price spectrum? Would those people pay a higher price for your pay to get psychology presentation Nunes and Boatwright tested that possibility.

On a boardwalk in West Palm Beach, they sold music CDs. Ariely, Loewenstein, and Prelec showed participants various products e. They asked participants whether they would purchase each product at the dollar amount equal to the home work editor for hire liverpool two digits in their social security number.

Should you simply ask customers to contemplate a high number? Luckily, your job is easier. In fact, Adaval and Monroe subliminally pay to get psychology presentation people to a high number before displaying a price. That exposure caused people to perceive the subsequent price to be lower. If you run an online store, you could simply mention your total number of customers near your price.

When people generate their reference price, that high number will trigger an anchoring effect and their reference price will be higher. Surprisingly, though, that strategy is often the wrong approach. Baker, Marn, and Zawada suggest raising the price of your old product.

You reinforce a lower reference price, which makes your new product seem more expensive. You can pay to get psychology presentation customers to choose a more expensive option if you sort products by descending price i. Suk, Lee, and Lichtenstein tested that claim in a bar. Over an 8-week span and 1, beersthe researchers alternated the sequence of beer prices. They maximized revenue when they sorted prices from high to low. When consumers evaluate a list of products, they use the initial prices to generate their reference price.

As humans, we focus on losses. When you sort products by ascending price i. Thus, they feel motivated to minimize that loss by choosing a lower priced pay to get psychology presentation. When you sort products by descending price i.

So the findings should generalize to other contexts e. With a difficult calculation, customers pay to get psychology presentation heuristics to make their purchase decision. Specifically, they use the first piece of information to guide their purchase decision: When the quantity is larger, an anchoring effect occurs.

Customers anchor on the high quantity e. Obviously you should only use this pricing tactic if it makes sense for your product. If you visually distinguish your price from a reference price e. Consumers will misattribute that visual distinction to a greater numerical distinction Coulter and Coulter, That fluency effect not only works with font color, but it also works with physical distance. Oftentimes, people use your own products for reference prices.

Who would choose that option when you could choose a web and print subscription for the same price? He conducted a study to test his hunch. And he was right. How much should you pay for a web and print subscription? Most people chose the web option because it was cheaper.

When you offer different versions of your product, people will naturally compare those options. To guide people toward the more expensive version, you can take the same approach. By adding a similar, yet worse, version of your expensive product, you influence the comparison process.

Suddenly your expensive product becomes more appealing. Even if you reduce the perceived magnitude of your price, customers might be stagnant. You should give them a nudge. This section will teach you some pricing tactics that can motivate people to buy. Considering those factors, you can see why Uber — a ride-sharing service — revolutionized the taxi industry.

In traditional taxi rides, the saliency of payment is very high. You see a meter constantly rising. Each minute evokes an increasingly painful sensation. Plus, at the end of the ride, the taxi driver makes you pay by cash or credit card. Everything is automatically charged to your card. Credit card processing is one tactic to pay to get psychology presentation the pain of paying, but you can reduce that pain in other ways too.

This section will give you a few ideas. The pain of paying can be triggered pretty easily. Before you start removing dollar signs, you should consider the overall clarity of your price. Oftentimes, you need a dollar sign to indicate that your number is, indeed, a price. Only use this tactic in formats where customers will expect more info price to appear e. When possible, your customers should pay before they use your product or service.

Prepayments benefit all parties involved. Second, people will be happier with your product. That insight can be helpful with monthly subscriptions. Click you charge customers monthly payments, you should charge them at the beginning of the month and frame your message in a forward-looking manner.

To reduce the pain of paying, consider bundling your product. However, since no such guilt is associated with the purchase of utilitarian items, framing the discount on utilitarian component of the bundle has little additional impact. Inexpensive products reduce the perceived value of expensive products. Brough and Chernev asked people to choose between a home gym and a 1-year gym membership.

The fitness DVD reduced the perceived value of the home gym. When describing your product, avoid references to money. Instead, mention a concept that has a much greater benefit: time.

Since the money is refundable, customers might not give too much additional resistance. More importantly, that payment medium will distort the essence of that money. If you implement that strategy, you might also want to match customer deposits by a certain percentage. Second, you create an off-balance conversion between their money and account value. If this were the case, we would expect that combined-currency pay to get psychology presentation across the currencies lose their efficacy.

But they also care about the perceived fairness of your price. Even if your price is low, customers could still perceive it to be unfair. Likewise, customers could still perceive high prices to be fair — depending on a few factors. Pay to get psychology presentation information will trigger a more empathetic perception of your price. You might be familiar with the paradox of choice.

Once people choose an option, they lose the benefits offered in the other options. If options are similar, then people will receive similar benefits with any option. So loss aversion is lower. In one study, Kim, Novemskey, and Dhar asked two groups of participants if they wanted to purchase a pack of gum. Each group had two options: Despite more info trivial difference, people were best ghostwriter services for phd more likely to choose a pack of gum when a price difference existed.

So why did that happen? Paradoxically, adding a small price difference increased the perceived similarity. As a result, they seek out differentiating characteristics. Thus, the product differences become more salient. Customers can differentiate the products based on price. Because customers focus less attention on product differences, the two products maintain a higher degree of similarity.

And pay to get psychology presentation similarity makes people more likely to choose a product. The easiest way to control price perception is through the just noticeable difference JND. Just Noticeable Difference — The minimum amount of change that triggers detection i. In practice, however, that principle is very counterintuitive.

Since businesses avoid price increases, they save that tactic as a last resort. Avoid waiting until the moment of desperation. With more frequent price increases, you also avoid reinforcing a concrete reference price. If your price stays the same for years, then people will become accustomed to your price at that specific level. Once you change your price, people will be more likely to notice. So they often avoid price increases by Leber, top annotated bibliography ghostwriter website gb Sie the physical size of their products e.

By reducing physical size, food marketers lower their costs and increase their margin. If you downsize your product, reduce the size of all three dimensions — height, width, and length — by an equal amount. If not used properly, discounts can actually harm your business.

In fact, go here people suggest that you should never use discounts.

That advice is pretty extreme. You can use discounts…you just need to use them properly. Where can you go wrong? Reducing the frequency and depth of discounts can help. Earlier, you learned that people can perceive different magnitudes for the same price, depending on the context.

When you offer discounts, you want to maximize their perceived size. So how do you pick? Since the price is abnormal, people will be less likely to incorporate it into their internal reference price. With discounts, however, you want to maximize the perceived magnitude. Those precise numbers will continue reading your discount seem smaller.

Indeed, Thomas and Morwitz found that people perceived the difference between 4. Soster, Gershoff, and Bearden found evidence for a continue reading dollar effect. Bottom Dollar Effect — We feel the pain of paying in accordance with the depletion of our budget.

We feel more pain when we have fewer funds in our budget. So, promotions of these types might be better timed at the beginning of the month, or immediately after consumers receive tax refunds, in order to ensure that budgets are not approaching exhaustion at the time of purchase.

If so, which placement is more effective: Biswas et al. Based on numerical cognition, we can subtract two numbers more easily when the smaller number is positioned on the right: They also found that it alters the perception of discounts.

When a sale price appears to the right, customers can calculate the discount more easily — enlarging its perceived magnitude. But one caveat: the discount should be moderate in size.

This is because when consumers calculate these discount depths, they may either suspect the retailer of opportunistic motives in the case of very low discounts or question product quality in the case of exaggerated discounts. Since the product is already priced high, the perceived cost will seem even larger. Instead, remain focused on the attributes and quality of your product. Marketers generally use two types of pricing strategies: hi-lo pay to get psychology presentation and everyday low pricing EDLP.

Based on numerical cognition, we compare numbers in relative terms. A similar process occurs when you compare small numbers e. Even when the absolute discounts were larger, people still perceived them to be smaller: Assuming that the left digit remains the same in the original and sale price, a discount will seem larger when the right digits are smaller.

I spent a ton of time researching and writing, so I hope you found the insights helpful. Did you skip to this conclusion? Instead of reiterating the pricing strategies, I want to end with one final tactic — the most important tactic in this list.

If you still have trouble justifying your price to customers — even after implementing the strategies in this article — then you might not have a pricing problem.

You might have a problem communicating the value of your product. With that tactic — and all of the other psychological pricing strategies in this article — you should be able to justify your price more easily. Just enter your name and email below. Nice to Meet You. Subliminal Messages: Do They Really Work? How Viral Marketing Actually Works.

How to Capture Attention in a Cluttered World. What I Learned From Analyzing 12 Million Customer Reviews. Psychological Pricing: A Gigantic List of Strategies. Last Updated: September 20, Welcome to a huge resource on pricing. PDF Bonus : This article is 9, words.

Click to download the full PDF so that you can reference it later. Step 1: Influence Their Argumentative proofreading site united kingdom. Prime a Small Magnitude. Tactic 1: Reduce the Left Digit By One. Tactic 2: Choose Numbers With Fewer Syllables.

Tactic 3: Display Prices in a Small Font Size. Tactic 4: Remove the Comma. Tactic 5: Use Words That Are Related to a Small Magnitude. Tactic 6: Separate the Shipping and Handling. Tactic 7: Offer Payments in Installments. Tactic 8: Mention the Daily Equivalence. Tactic 9: Be Precise With Large Prices. Increase the Fluency of Your Price. Tactic Position Low Prices Toward the Left. Tactic Expose Customers to Two Multiples of Your Price. Tactic Pay to get psychology presentation Prices Toward Names and Birthdays.

Tactic Show Prices at the Optimal Time. Tactic Display Red Prices to Men. Maximize Their Reference Price. Tactic Start Negotiations With a High Precise Number.

Tactic Expose People to Any High Number. Tactic Raise pay to get psychology presentation Price of Your Previous Product. Tactic Sort Prices From High to Low. Tactic Position Prices to the Right of Large Quantities. Emphasize the Gap Between Reference Prices. Tactic Add Visual Pay to get psychology presentation to Sale Prices. Tactic Offer a Decoy Product. Step 2: Motivate Them to Buy. Tactic Remove the Currency Symbol. Tactic Charge Customers Before They Consume. Tactic Attribute Bundled Discounts to Hedonic Products.

Tactic Shift the Focus Toward Time-Related Pay to get psychology presentation. Tactic Create a Payment Medium. Tactic Avoid Language Related to Money. Tactic Emphasize the Inherent Costs of Your Product. Tactic Add Slight Price Pay to get psychology presentation to Similar Products.

Tactic Use More Frequent Yet Smaller Price Pay to get psychology presentation. Tactic Downsize pay to get psychology presentation Feature Besides Price. Tactic Provide a Reason for the Discount. Tactic Offer Discounts That Are Easy to Compute. Tactic Offer Discounts Toward the End of the Month. Tactic Position Sale Prices to the Right of Original Prices. Tactic Only Give Discounts on Low-Priced Products. Tactic End Discounts By Phasing Them Out Gradually.

Tactic Offer Discounts With Low Right Digits. Get access to the full video when you subscribe to the blog. My pricing eBook is 9, words. Click to download the PDF for free.

Want to Stay Updated on New Content? Download a full PDF version of this article so that you can reference it later.

Honors Thesis Presentation - Stanford University, Department of Psychology

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