Psychological Pricing

Topics: Marketing, Pricing, Business terms Pages: 1 (286 words) Published: February 24, 2010
MKT 521
*Psychological Pricing S*trategy
{draw:frame} Reference Pricing.-
Any business can leverage on reference pricing by positioning their product in the market place along with high value or luxury items to make consumers perceive that its product fits into the same category. However, if consumers feel that the product does not belong in that category the pricing and positioning strategy will not work and be it counterproductive for the product and the company. Two common forms of psychological pricing are odd pricing, and prestige pricing. Odd Pricing.-

In a study conducted by Schindler & Kibarian in 1996 they tested odd pricing using three versions of a direct mail catalog for women's clothing. “The catalogs were identical except for the prices which ended with 00, 99 or 88. The version with prices ending in 99 generated 8% more sales volume and had more purchasers than the 00-ending version. The 88-ending catalog produced a similar sales volume and number of purchasers to the 00-ending version”. In this example we can clearly see how the consumer perception of better value directly impacted sales, even though there was an alternative that ended in 88 which will actually be lower in value was not identified by consumers. Luxury *Prestige Pricing*.-

Higher prices usually denote higher quality. Luxury brands are a perfect fit of this strategy. Another example of companies that use prestige pricing in the car industry are Mercedes-Benz, Ferrari and Rolls Royce. Psychological pricing is a good strategy to use when the company is certain that it will be the best-fit for the product, otherwise it can be counterproductive. References

Kotler Philip, Armstrong Gary. Principles of Marketing Thirteen Edition. Prentice hall

References: Kotler Philip, Armstrong Gary. Principles of Marketing Thirteen Edition. Prentice hall
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