Psychological Pricing
Define the term Psychological Pricing and what are their aspects?
Expert
Psychological Pricing:
This policy considers the psychology of prices and not only the economics. When the customers can judge the quality of a product by examining it, they make less use of price to judge the quality of product. They rely more on their judgments, past experience with the product and its superior/ attractive/ unique features.
When customers cannot judge quality because of lack of information or skill, price becomes an important quality signal.
Another aspect of this type of pricing is reference prices, which are prices that the buyers carry in their minds and refer to when they look at the product. Sellers can influence or use the reference prices when setting prices. Even small differences in prices can suggest product differences.
Many customers believe that prices should end in odd numbers. Many customers see that a pair of shoes are priced at $99 instead of $100 as a price in $90 range (two figure price) rather than $100 (three figure prices) and thus psychologically considers the product to be less expensive.
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Table illustrates the average retail price of milk and the Consumer Price Index from the year 1980 to 1998. Discover Q & A Leading Solution Library Avail More Than 1455888 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1941559 Asked 3,689 Active Tutors 1455888 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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