Psychological pricing encompasses all pricing strategies that leverage human cognitive biases and behavioral tendencies to influence purchasing decisions. Rather than setting prices purely on cost-plus or competitive factors, psychological pricing considers how consumers perceive and process price information.
Common psychological pricing techniques include: charm pricing (.99 endings), price anchoring (showing higher reference prices), bundle pricing (perceived savings on grouped items), decoy pricing (adding options to make target products more attractive), and prestige pricing (premium prices signaling quality).
For DTC brands, mastering psychological pricing is essential for conversion optimization. A/B testing different price presentations—including the presence or absence of dollar signs, color of sale badges, and positioning of compare-at prices—can significantly impact conversion rates without changing the actual price.