It is important to take note of where pricing labels are placed on items. In retail, label placement is everything!
- Do not cover important item information.
- Do place a tag on the upper right corner of a product if it is boxed.
- Do use color coded labels for special promotional pricing.
Psychology of Retail Pricing
Consumers are known to go out and compare pricing prior to making a purchase. Everyone wants to receive the most for their money, and get the most out of the product or service they are buying. In retail, prices are constantly adjusted in order to get consumers to spend more time and money.
There are a number of ways psychology plays into the way retail stores price their items.
- Free – When retailers offer something to the consumer for free. This can be through a buy one, get one free sale, or offering a free item on a specific date at a specific time. Labeling items as free allows the consumer to think there is no downside or risk to receiving a product.
- Minimalism – High end retailers have removed any likeness of a dollar symbol to prevent consumers from thinking their products are cheap. Most often, prices are listed as simple numbers (65 instead of $65.00) to keep the consumers mind focuses on the product and less on price.
- 10 for $10 – This method of pricing is common in food stores, and is meant to get the consumer to purchase more product than necessary. Consumers often think that to receive the deal, they need to purchase 10 items, when in reality, the discounted pricing is still applied if you buy 1 item (1 for $1). Psychologically, consumers feel that they need to purchase more to save more.
- Per-customer – When items are limited to consumers and labeled as “limit 4 per customer,” people tend to believe that the items are in limited supply, so they stock up on the maximum they are allowed to purchase.
Common Types of Retail Pricing
In retail, there are many ways that products are priced and displayed to consumers so that the retailer can turn a profit. Below are some of the most common types of pricing found in retail.
- Comparative Pricing – When retailers compare their prices to those of their direct competitors in the market, and advertise to consumers as such. Note that this method of pricing is not always as effective as retailers think it will be, as some consumers perceive a lower priced item to be of lower quality.
- Charm Prices – When a price ends in the number 9, it is considered “charm pricing.” Consumers perceive a price ending in 9 to be offered at more of a deal than a price ending in any other number, and are more likely to purchase that product.
- Emphasizing Sale – When the regular price is posted above the sale price, consumers can more easily recognize their savings, and are more likely to purchase that product.
- Anchoring – Placing a $12,000 item next to a $100 item, making the $100 item look like a steal.
- Straightforward Pricing – Giving consumers one price option, making their choice a simple “Yes, I can afford that and want to spend that” or “No, I don’t want to spend that.”
- Pricing Options – Retailers offering a similar product in different quantities or sizes. Most often, consumers purchase the middle priced item.