Pricing Psychology

Here are some ways that a company can manipulate your mind with price to get more money from you:

Premise:  You want to buy a printer that is worth about $300 to you. 

Pretend that they are selling more than they are:  This is my main peeve about pricing.  Customers buy the whole product, meaning everything they need to use the thing, which is obvious and understandable.  Some companies sell only one piece of the whole product but make it look like your getting everything.  Then after you've made your decision to buy they tell you, "Oh, you'll need this and that extra"  It is easier to upsell the additional junk than to sell the full package at the higher price.

Example:  Printer advertised for $300.  You pick it up, go to the counter, and just about finish buying it when they ask you if you have cables at home.  "Nope", you say.  So they toss in a $25 cable into the bag.  They've just got an extra nearly 10% from you.

Charging a higher price to trick you into thinking it is higher quality:  This is why people pay twice as much for Audi versus VW, even though they are practically the same car.  Why people pay $45 for a shirt that costs $15 at Costco.  No matter what you buy at the dollar store nobody will ever think it is much more than junk for the very reason that it only costs $1.

This works best when a person can't judge quality perhaps because the product is complex.  Paradoxically, if the customer doesn't know anything about the difference between products except the price they will often not choose the lowest price.

Example:  Two printers with the same specs, in fact identical internal components.  One has a 5 sheet feeder, a flimsy looking output tray, and ugly buttons.  The other has a 250 sheet feeder, gold plated connectors, a nice shiny output tray, and lighted buttons.  Both printers are really identical in the sense that it did not take much, if any, more effort/cost to produce the second.  However they might be priced at $300, and $400 respectively.  Probably most people will buy the second printer for $100 more dollars because it looks like they're getting a printer that it at least twice as good.

Fake bargains:  A company can increase sales by taking the current price sign, write double the current price over top, cross it out, and write 50% OFF! next to it.  Now all of a sudden some of those people who would not have touched that product with a ten foot pole will come running in to snatch up such a crazy bargain. 

Example:  Would you buy a $300 regular priced printer or a $350 printer with a "Marked down from $500" sign?

Making the price too complicated to understand:  Bundling different items together, including many that are unwanted, lets the company sell you more and keep you thinking you got a good deal.  This is done all the time by phone and cable companies.

Example:  You cannot buy the printer alone, but you can buy a printer ($300 value) with photo-editing software ($50 value), cable ($25 value), discount on a print sharing device ($30 value), some glossy poster paper ($15 value), a six month membership to a typsetting club ($200 value) for $350.  Sounds like a reasonable deal, even though all you want is a working printer for $300.  They get $50 extra from you because the incremental "value" is $320.  But you didn't want any of that except the cable, which you shouldn't be paying for anyway because it is part of a working printer.

Lying about the price:  The classic technique here is a rebate.  Check out my rebates post to see how rebates are basically promises that a company does not intend to keep.

Example:  $400 printer with a $100 rebate, which of course may not be honored.

Notice that the above techniques do not include any type of added value or advertising.  The above are only decisions about what to charge and how to present the price.  To me this is essentially useless, and most of it is based on "trickery" to prevent customers from making a good value calculation.  We all have a certain price beyond which we don't want to buy an item.  If a company can make you buy something for a higher end price then I would call that stealing.