What is pricing psychology, and why is it so effective?
As consumers of products, services and experiences, we don’t know what things should cost. The seller leverages this information symmetry to increase the perceived value of the buyer through pricing psychology tactics.
Psychological pricing is extremely effective in influencing consumer behaviour. Its tactics are well-known and widely used in the B2C world, but can (and we argue, should) be applied to B2B events, too.
Pricing psychology applied to events is a strategy that uses pricing to increase the likelihood of meeting your client’s psychological need for something that your event provides, whether that’s learning something valuable, building meaningful connections or a combination of the two.
Consider this example of an early-bird ticket user interface:
Nothing wrong with it, right?
Well, yes and no.
What if I told you that there are five surprising ways, backed by empirical science and stupidly easy to implement, pricing psychology can help you maximise revenue from your early-bird ticket offers? Let’s dive into them, one by one.
Early-bird Event Pricing Tactics
- Design the lower price in a smaller font.Showing the reduced price of the early-bird price in a smaller font increases the likelihood of purchase.
Coulter, K., & Coulter, R. (2005). Size Does Matter: The Effects of Magnitude Representation Congruency on Price Perceptions and Purchase Likelihood. Journal of Consumer Psychology, 15(1), 64-76.
- Place the prices horizontally, not one on top of the other.
Biswas, A., Bhowmick S., Guha, A., & Grewal, D. (2013). Consumer Evaluations of Sale Prices: Role of the Subtraction Principle. Journal of Marketing, 77(4), 49-66, & Choi, P., Coulter, K.,
- Show the lower price on the right and the higher price on the left.
Because we read left to right, this placement helps us understand the price reduction. If your website is in Arabic or Hebrew, simply flip this rule.
(2012). It’s Not All Relative: The Effects of Mental and Physical Positioning of Comparative Prices on Absolute versus Relative Discount Assessment. Journal of Retailing, 88(4), 512-527.
- Choose regular and early-bird prices, so that the early-bird price’s right digit is lower than the regular price’s right digit, if the left digit is the same.
i.e. £295 reduced to £250, not £249. Because we read the numbers to ourselves, the lower last number makes the reduced price seem lower.
Coulter, K., & Coulter, R. (2007). Distortion of Price Discount Perceptions: The Right Digit Effect. Journal of Consumer Research, 34(2), 162-173.
- Spatially separate the two prices.
This separation helps us to understand the difference between the two prices.
Coulter, K., Norberg, P. (2009). The effects of physical distance between regular and sale prices on numerical difference perceptions. Journal of Consumer Psychology, 19(2), 144-157.
Let’s now have a look at how a user interface would look after we implemented these user interface optimisations.
Small, seemingly trivial user interface changes can drastically increase your conversion rates because we don’t perceive prices rationally.
Implement these five simple tactics and rest assured that the registration count for your paid event will thank you for it.