The Psychology of Price Points

You can learn a lot from observing the pricing strategy of the big retailers, retail travel agents and others with consumable products.  They are forever testing price points and assessing customer reaction.

The psychology of this is fascinating.  $4.99 does work better than $5.00. $9.95 or $9.99 will out pull $10.00 every time. $99 will get a better result than $100.

People have inbuilt barriers that cause them to hesitate when the price exceeds a certain price point. Sometimes this means that you should keep a price down and reduce your margin. At other times it means you can raise the price and increase your margin without affecting the number of items sold.

For example, if a café has an item on the menu for $13.00, will they sell any less if the price is $14.95?  I doubt it.

Learning Point: Review your price points moving some up and others down to fit with the process shown above. For example, each $20 item becomes $19.95. Note the effect that this has on the number of items purchased and also on the income generated.

Image courtesy of Shutterstock

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Jurek Leon is a storyteller, speaker and trainer. Subscribe to Jurek's FREE monthly 'Terrific Tips' e-newsletter at Alternatively, email