31 min
The Psychology Of Pricing: Part 1 Resourceful Designer: Strategies for running a graphic design business
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- Design
Use these psychological tactics to change how people see prices. I recently read a very in-depth article by Nick Kolenda on the psychology of pricing. I was so fascinated by what he revealed that I immediately changed some of the ways I display prices for myself and the things I design for my clients.
I thought I would save you time by summarizing the 42 research-proven psychological tactics in Nick's article in a podcast series. I’m sure you’ll find it very useful in your design business. All studies I reference are linked to in Nick's article, in case you're interested.
As Nick puts it, At the end of the day, price is merely a perception. Nothing more. Nothing less. In fact, you can change that perception of how people interpret a price simply by changing the visual traits of the numeral.
It’s a given. The number 5 is greater than 4. And 6 is greater than 5. But using these psychological pricing techniques, you can actually make prices seem lower - without reducing the actual price.
According to a 2002 study, most people don’t remember exact prices. Rather, they remember general prices.
Have you ever looked at a price, and later when asked about it, only have a general idea of how much it was?
When I get home from the grocery store and my wife asked me how much it cost. I don’t always remember the exact price. Was it $131 and change, or was it $138 and change? So I might tell her it cost "$130 something dollars."
Because humans have such a hazy memory regarding prices, we can use certain psychological tactics to influence people into seeing smaller prices than they realize. Let me get right down to the actual tactics.
Tactic 1: Reduce the Left Digit By One You’re probably already familiar with this tactic. Reducing the left digit by one creates a perception of a lower price. $199 is viewed as a much better deal than paying $200.
Gumroad's conversion rates study shows that pricing things at $0.99 instead of $1 or $2.99 instead of $3, or $5.99 instead of $6 conversion rates increase by 2-3%.
According to a 2005 study. Our brains encode numbers so quickly that we register the size of the number before we finish reading the entire number. When reading $1.99, our brain registers it as a dollar something which is lower than $2 something making it more desirable.
Nick offered a bonus tip to this tactic. Superscripting or minimizing the digits after the decimal places more emphasis on the number before the decimal. So $1 with a small 99 next to it appears smaller than $1.99 all the same size.
Tactic 2: Use Prices With Fewer Syllables I'm a bit skeptical about this tactic. But according to a 2012 study, the more syllables there are, the more mental resources we need to process the information.
The same principle applies to numbers. If we spend more mental energy reading a number or price, we falsely perceive that price as larger. The fewer syllables involved, and we perceive that price as smaller. It doesn’t matter that you are not saying the number out loud. Your brain does it for you.
This same study found that a slightly higher price with fewer syllables was more favourable to people than a lower price with more syllables.
For example. $27.82 has 7 syllables. $28.16 has only 5 syllables. There’s only $0.34 between the two prices. But people were more inclined to spend the higher amount.
As I said, I’m skeptical about this one, but the studies do show it to be true.
Tactic 3: Display Prices In A Small Font Size. This one applies to what we do as designers.
According to a 2005 study. Human brains conceptualize size with value. If you display the price in a smaller font size, people will perceive the price to be smaller.
Another trick is to position larger elements around the price to create a visual hierarchy. The larger elements will make the price visually smaller, which in turn makes the perceived price smaller.
The revers works for discounts. Display discounts larger to emphasize the
Use these psychological tactics to change how people see prices. I recently read a very in-depth article by Nick Kolenda on the psychology of pricing. I was so fascinated by what he revealed that I immediately changed some of the ways I display prices for myself and the things I design for my clients.
I thought I would save you time by summarizing the 42 research-proven psychological tactics in Nick's article in a podcast series. I’m sure you’ll find it very useful in your design business. All studies I reference are linked to in Nick's article, in case you're interested.
As Nick puts it, At the end of the day, price is merely a perception. Nothing more. Nothing less. In fact, you can change that perception of how people interpret a price simply by changing the visual traits of the numeral.
It’s a given. The number 5 is greater than 4. And 6 is greater than 5. But using these psychological pricing techniques, you can actually make prices seem lower - without reducing the actual price.
According to a 2002 study, most people don’t remember exact prices. Rather, they remember general prices.
Have you ever looked at a price, and later when asked about it, only have a general idea of how much it was?
When I get home from the grocery store and my wife asked me how much it cost. I don’t always remember the exact price. Was it $131 and change, or was it $138 and change? So I might tell her it cost "$130 something dollars."
Because humans have such a hazy memory regarding prices, we can use certain psychological tactics to influence people into seeing smaller prices than they realize. Let me get right down to the actual tactics.
Tactic 1: Reduce the Left Digit By One You’re probably already familiar with this tactic. Reducing the left digit by one creates a perception of a lower price. $199 is viewed as a much better deal than paying $200.
Gumroad's conversion rates study shows that pricing things at $0.99 instead of $1 or $2.99 instead of $3, or $5.99 instead of $6 conversion rates increase by 2-3%.
According to a 2005 study. Our brains encode numbers so quickly that we register the size of the number before we finish reading the entire number. When reading $1.99, our brain registers it as a dollar something which is lower than $2 something making it more desirable.
Nick offered a bonus tip to this tactic. Superscripting or minimizing the digits after the decimal places more emphasis on the number before the decimal. So $1 with a small 99 next to it appears smaller than $1.99 all the same size.
Tactic 2: Use Prices With Fewer Syllables I'm a bit skeptical about this tactic. But according to a 2012 study, the more syllables there are, the more mental resources we need to process the information.
The same principle applies to numbers. If we spend more mental energy reading a number or price, we falsely perceive that price as larger. The fewer syllables involved, and we perceive that price as smaller. It doesn’t matter that you are not saying the number out loud. Your brain does it for you.
This same study found that a slightly higher price with fewer syllables was more favourable to people than a lower price with more syllables.
For example. $27.82 has 7 syllables. $28.16 has only 5 syllables. There’s only $0.34 between the two prices. But people were more inclined to spend the higher amount.
As I said, I’m skeptical about this one, but the studies do show it to be true.
Tactic 3: Display Prices In A Small Font Size. This one applies to what we do as designers.
According to a 2005 study. Human brains conceptualize size with value. If you display the price in a smaller font size, people will perceive the price to be smaller.
Another trick is to position larger elements around the price to create a visual hierarchy. The larger elements will make the price visually smaller, which in turn makes the perceived price smaller.
The revers works for discounts. Display discounts larger to emphasize the
31 min