In 2007Coulter and Coulter showed two advertisements to two random groups of customers. Each advertised £10 discounts on flights to Turkey. One listed tickets at £188. The other showed a higher price: £233. 
Customers found that the cheapest tickets seemed to worse value. Why? The researchers found that people differentiate smaller numbers more easily. The difference between 4 and 3 seems more salient than 9 and 8. Therefore, customers were more likely to purchase when prices ended in lower figures, £244 to £233), compared to those ending in higher figures (£199 to £188).
The takeaway is quite simple. Next time you run a discount, make the sale price less than five. This is just some pricing advice that we discussed on my podcast Pushthe UK’s number one marketing podcast. Here are four more psychology-backed tips for pricing your products.
Summary
Bring down the price.
Check out the two ads for a cheap lunch at Huel. One shows the total cost of 21 meals (£78.96). The other knocks down the price of lunch ($3.76). The researchers found that lowering the price per unit achieved better results with customers. Showing a lower price led shoppers to perceive they were getting a better deal.
Richard Shotton and Michael Aaron Flicker tested ads very similar to this one for their awesome book Hacking the human mind.
In one study, 282 shoppers were divided into groups. The middle was shown Sierra Nevada Pale Ale priced at $18.99 for 12 bottles. The other group was told the unit price: $1.58 per bottle. Among those who were shown the price per bottle, 28.6% declared that the quality/price ratio was good or very good (more than double the 13.7% who only saw the total price).
Framing the cost per unit made the purchase more reasonable and convenient.
Show the price difference.
Companies that want to increase sales from their audience must choose the right framework. Take this 2019 David Hardisty’s experiment at the University of British Columbia. Hardisty tested several pricing packages for New York Times subscriptions.
Group A included two plans:
- A “Digital Access” subscription for $9.99 per month.
- An “All-Access” subscription that included web access, apps, print newspapers, podcasts, and crosswords for $16.99 a month.
Group B saw the same products described differently. The first plan featured a “Web + App” subscription for $9.99 per month. The second plan, called “+ All the Extras,” was available for an additional $7 per month.
Same total price. Different framing. But Group B chose the premium plan twice as often. Why? Because $7 more seems easier to justify than $17 total.
Do you want people to go premium? Don’t show them the full price. Use differential pricing framing and simply tell them the premium.
Be transparent with your costs.
I went viral It’s LinkedIn for sharing this image about chicken soup. One showed a bowl priced at $7.99. The second ad showed a breakdown of all the ingredients, how much they cost, and the profit margin before the final price. Which sign would be better for sales? The post attracted a lot of attention because the results were surprising.
My post was based on a 2020 study from Harvard designed to test the effects of displaying the cost of a product. The initial experiment took place in a Harvard cafeteria, where researchers tracked actual purchases after students viewed the comparisons.
When costs were made visible, soup sales increased by 21%.
The point is that price transparency wins. Customers are more willing to pay when they know what it takes to make a product.
Make the difference visible.
Imagine giving someone the equivalent of $1 and offering them the choice between two packs of chewing gum. Same flavour. Same brand. Same price.
What happens? Decision paralysis.
In a South Korean studyparticipants in South Korea were given ₩1,000 and asked to choose between two identical packs of chewing gum, each priced at ₩630. Only 46% made a purchase. More than half left.
So, the researchers made a small change. They adjusted the prices slightly. One pack costs ₩620. The other brand was priced at ₩640. This time, 77% made a purchase. A small difference of 20 wins led to a 31 point increase in signings.
Why does this happen?
When two options seem identical, people struggle to decide. So, if you offer similar choices, find the differentiating factors. Make one a little cheaper, a little faster, or a little more attractive. That small change can make a big difference.
Small nudges can work.
None of the above tactics changed the products themselves. Each approach simply changed the way the price was presented. Those small changes in framing have dramatically changed what people choose. So remember: small changes can help products stand out, drive more deals, and entice shoppers to buy.
Start testing and see what works for you.
