By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
Sept. 25, 2019
You have one idea about how your products are priced, and your patients may have another.
Psychological pricing is based on the theory that some prices have a bigger psychological impact on our patients than others. Here are two pricing strategies that you can adopt in your practice.i
Charm Pricing Strategy
With Charm Pricing, reduce the left digit by one. As an example, $100 becomes $99.99. Your brain processes $100 and $99.99 as different values. $99.99 is processed as less expensive than $100.
Thomas and Morwitzii conducted research they called “the left digit effect in price cognition.” They found that if the leftmost digit changes to a lower level (e.g.: $100 is changed to $99.99) the price is perceived as smaller, but this perception does not hold if the leftmost digit remains unchanged (e.g.: $80.60 is changed to $80.59).”
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The University of Chicago and MIT ran an experiment in which women’s clothing were set at prices of $34, $39 and $44. The clothing sold best at $39 even though the price is more expensive than other options.
Keith Coulter’siii research at the graduate school of management, Clark University, suggests that this effect may be enhanced when the cents are printed in a smaller font.
“Prestige” Pricing Strategy
Prestige Pricing is the opposite of Charm Pricing. In Prestige Pricing all numerical values are rounded. An example would be $99.99 is changed to become $100. Research by Kuangjie Zhang and Monica Wadhwaiv found that rounded numbers are more fluently processed and encourage reliance on feelings.
Non-rounded numbers are less fluently processed and encourage reliance on cognition. The rounded numbers “feel right” because the purchase is being driven by feelings. Zhang and Wadhwa found that people were more inclined to buy a bottle of champagne priced at $40 rather than at $39.72 or $40.28.
So, which pricing strategy should I use?
Run a three-month trial in your practice using each pricing strategy. Find out which one works better in your practice with your patients. Once you have that knowledge, then you can convert all of your pricing into the strategy that works best.
ii. Manoj Thomas and Vicki Morwitz, Journal of Consumer Research, Vol. 32, No. 1 (June 2005), pp. 54-64
iv. Monica Wadhwa and Kuangjie Zhang, Journal of Consumer Research, Vol. 41, No. 5 (February 2015), pp. 1172-1185