Six Tips On E-Commerce Pricing Psychology


E-commerce pricing psychology is one of those tricky things that every e-merchant struggles and experiments with over time. We recently encountered a huge resource on pricing psychology that explores in exhaustive detail all the most relevant social psychiatry research about the effect of pricing displays on purchasing decisions, both off and online.

Psych marketing expert Nick Kolenda’s article on Pricing Psychology has no fewer than 42 tips for merchants looking to attract a buyer’s psyche, rather than discouraging it.

We’ve distilled the best of those into just six tips we think are especially useful for e-commerce merchants.

1: Reduce the Left Digit By One

For what seems like forever, marketers have used “charm pricing” — prices that end in 99, or 95.And the results speak for themselves, as you can see in this side-by-side comparison of Gumroad’s sales:

Charm Pricing table on e-commerce pricing psychology
Source: Gumroad

When people see those positive results, they often credit the 9’s in the price. Actually, the left digit is the most important.

Charm pricing is most effective when the left digit changes. A one-cent difference between $3.80 and $3.79 won’t matter. However, a one-cent difference between $3.00 and $2.99 will make a huge difference.

The left digit so important because it anchors the perceived magnitude.

According to Kolenda, our brains encode numbers so quickly (and beyond consciousness) that we encode the size of a number before we finish reading it.

Bonus Tip: You could emphasize the new base digit by visually minimizing the digits after the decimal.

e-commerce pricing psychology Table 2

2: Display Prices in a Small Font Size

Your brain has a universal conceptualization of size. Thus, there’s a blurred overlap between VISUAL size and NUMERICAL size.

That’s why customers perceive your price to be smaller if you display your price in a smaller font size..

In a layout, position larger elements around your price. Those elements will reinforce a smaller visual magnitude, which will reinforce a smaller numerical magnitude.

e-commerce pricing psychology Table 3

The reverse works for discounts. Since you want to maximize the size of discounts, you should display those numerals in a large font size.

Bonus tip: Don’t use the word “HIGH” (or equivalent) near a displayed price. The brain will associate the adjective with the numbers next to it.


e-commerce pricing psychology Table 4

3. Know when (and when not) to use round numbers.

“Rounded-ness” helps numbers to be fluently processed. Un-rounded numbers are disfluent, taking more processing time with the right side of the brain.

Researchers cited by Kolenda found that round prices — because they are fluently processed — work better for emotional purchases. Being able to process the number quickly can make the price “just feel right.”

The opposite is also true. People use more of their right cerebral cortex to process non-rounded prices. Subconsciously, those prices seem more fitting with rational purchases.

So for emotional purchases – say, cosmetics or home decor, keep it simple.

e-commerce pricing psychology Table 5

But for rational purchases like tools or appliances, give them a longer number to throw in with their decision making.

e-commerce pricing psychology Table 6

4. Price first, or product first? It depends on the product category.

When products were displayed first, participants based their purchase decision on the product qualities.

Product-first display

When prices were displayed first, participants based their purchase decision on the economic value.

price-first display

If you sell luxury products, you want people to base their decision on your product qualities. You want the price to be secondary. Thus, for luxury products, show the product, and THEN show the price.

e-commerce pricing psychology Table 7

The opposite is true for utilitarian products like a pack of AA batteries, or machine parts. People are more likely to buy those products if they encounter the price first, because they will tend to appreciate the economic value of the purchase.

e-commerce pricing psychology Table 8

5. Visually contrast regular vs sale prices.

When you compare your price to a higher price, people are more likely to buy your product because they feel less motivated to research the decision. They’ve already done their homework.

But here’s a neat trick to optimize that comparison.

If you visually distinguish your price from a reference price by using a different size, font, color or some combination of those three, you trigger a fluency effect. Consumers will mis-attribute that visual distinction to a greater numerical distinction.

That fluency effect not only works with font color, but it also works with physical distance. When your price is horizontally farther away from a reference price, people perceive a greater numerical distance.

And don’t forget about font size. Smaller font sizes are especially effective when they’re positioned next to a larger reference price.

e-commerce pricing psychology Table 9

6. Reduce the frictions (and pains) of paying.

Each time we purchase something, we feel a sense of pain — often referred to as the “pain of paying”.

Considering those two factors, you can see one main reason why Uber revolutionized the taxi industry.

Uber disrupted the taxi industry in several ways, but one of the most significant, from an e-commerce standpoint, was by removing the pain and friction of handing over a credit card and signing a receipt, or handing over cash out of pocket. No meter telling you how much you’re spending every half minute. No physical payments. Everything is automatically charged to your card’s saved payment information in the app. Just add a tip on your screen, and go. So much less pain!

Google Shopping has addressed payment friction for online shopping in the same ways. Google users can store payment information in their Google account settings, for use throughout the Google ecosystem. In the past two years Google has streamlined, upgraded and opened the doors to all merchants who want to sign up for Google Shopping. Consumers searching for products via Google are taken directly to the merchant’s Google-hosted product page and can check out instantly, using their stored payment and address info from Google. Frictions gone. Pain deferred.

Shoppingfeed is a certified Partner in Google’s Shopping platform, as well as in every major online marketplace worldwide.

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