Pricing Psychology: What Makes You Spend?

November 18, 2013

You would think that consumers who routinely comparison shop, wait for deals, and think through purchases with great care and precision are entirely in control of their wallets and immune to marketing tricks that are used to trigger spending.

But if the messages are subtle and used to target underlying beliefs we’ve established to determine what’s “valuable,” are any of us really immune?

Check out some of these commonly used tricks that are used to get you to spend. Chances are you’ve been victim to at least one of them. (I admit I have.)

No dollar signs? You’ll spend more.

You know you’re in an upscale restaurant when the prices are void of dollar signs. The truth is, this simple symbol omission does surprising things to the amount you’ll end up paying at the end of the meal.

According to a study conducted at Cornell University, if the price was listed without the dollar sign or the word “dollars,” restaurant patrons ended up spending significantly more than they would if given a price with a different format.

If advertising plays on the concept of “time,” you’ll be more swayed to buy.

For most people, how they spend their time is very important to them.

Well advertisers have tapped into this idea, and that’s precisely why they try to sell products touting the benefits of time over money. (Think, “It’s Miller Time.”) According to a study conducted at Stanford Graduate School of Business, mentioning time pushes the consumer to recall the personal connection they have with a product.

Cassie Mogilner, a coauthor of the study, said, “…When you refer to time, there’s a big social component that integrates the products you use with the people in your life, which makes the product experience more meaningful and richer.”

See the number “9?” You’ll be convinced it’s a bargain.

When it comes to pricing, round numbers just aren’t all that exciting for consumers. But throw in the number 9 and stores just might just have a buying frenzy on their hands.

According to experiments backed by MIT and the University of Chicago, consumers were more likely to purchase an item if it ended in a 9 – even when compared to sales where the prices were lower (i.e. $39 items sold better than $34 items).

As a result, the number 9 is now known as a “charm price.”

When it comes to finding a good deal, font size and easy math matter.

People are constantly taking in visual cues and using them to make decisions – especially when it comes to making purchases. Therefore, if the size of a price is large and in bold print, even if it’s a killer deal, you are less likely to buy – especially if the font of the original price is smaller in size.

In addition, if you are forced to calculate the difference between the regular price and a sale price, you are more likely to see it as a good deal if the math is easy – i.e. $20 down from $25 vs. $19.89 down from $25.

With three choices, you’re more likely to buy than to walk away.

Apparently consumers like options, and when more options are presented, they are more likely to decide between them then walk away altogether.

William Poundstone, author of the book “Priceless: The Myth of Fair Value and How to Take Advantage of It” touts this point, and shares that if marketers want consumers to choose a specific product or option, they will place it in the middle in terms of price. That way consumers feel as if they are getting a good deal without getting the lowest quality item.

Think you know what something is actually worth? You’re really just using “anchoring.”

The truth is, you don’t really know what you should be paying for something. You only make those decisions based on what other people are offering for that price. Or how much a similar product is somewhere else. These are the “anchors” – how we decide if something is worth the money.

But what if marketers are manipulating those anchors? Well, they are.

Kyle Westaway, co-founder of Biographe, said, “If the customer has a high anchor, he or she will be willing to pay more. We encounter this every time we walk into a Starbucks. Before Starbucks, a cup of coffee cost 25 cents. But Starbucks redefined the value of a cup of coffee by selling a White Chocolate Mocha Frappuccino for $4.75. I didn’t think twice about paying $1.50 for the cup of coffee I’m sipping on as I write this. The White Chocolate Mocha is the high-price anchor.”

If you’re deciding on what’s “reasonable,” it’s not just about what it is, it’s about where it came from.

Compare these two scenarios: You have a four-course meal at a “hole-in-the-wall" restaurant where the atmosphere is lacking but the food is delicious. You now have a similar four-course meal at a high-end restaurant recently mentioned in a few big publications, with a comfortable and visually enjoyable atomosphere – but the food isn’t quite as good.

Would it be fair to have to pay the same price for both?

According to studies conducted by economist Richard Thaler, we have a belief that it’s unfair to pay the same amount for something if it didn’t come from somewhere that’s exclusive or high-end – even if it’s the same product or an even better quality.

Parting Thoughts

So before you head out the door to do your shopping – especially with holiday shopping just around the corner – pay attention to some of these subtle, but oh-so-powerful marketing tricks. They just might be convincing you to reach into your wallet when it’s not in your best interest to do so.