Psychological pricing: 10 strategies that actually work

Ever noticed that $9.99 always looks like a better deal than $10? This is the most well-known example of psychological pricing, the strategy of using behavioural insights and strategic pricing to influence customer behaviour.

We’re all familiar with supermarkets knocking off a cent to make an item look more affordable, but this isn’t the only way psychological pricing can be put to work. The right strategy can even make products look like a desirable premium item for which customers want to pay more.

In this guide, we’ll explore 10 psychological pricing strategies that achieve different goals for businesses in various niches. We’ll examine what they are, why they work, and how you can apply them to convert customers and drive revenue growth.

Psychological pricing is the art of tapping into natural biases and perceptions to influence how consumers perceive and respond to product and service pricing. In a nutshell, it’s about setting prices to make your customers feel a certain way about your offers.

Why does this work so well? Because 70% of buying decisions are based on emotion . Businesses that align their pricing with how customers feel rather than what they calculate will put themselves in the best position to drive sales and connect with their audience.

Psychological pricing isn’t reserved for businesses that want to make their products appear cheaper. It has a wide range of use cases that can benefit organisations in all industries. It’s all about knowing the right tactic to use for the right product and the right audience.

Here are 10 psychological pricing techniques that work, and the industries they serve best.

Let’s take a closer look at each psychological pricing strategy.

This is the tactic you’re likely most familiar with. Charm pricing involves setting prices just below a round number ($4.99 instead of $5) to make a product look cheaper than it is.

Why does this work? It comes down to the left-digit effect , the idea that consumers place more emphasis on the left-most digit of a price. This means $9.99 looks far cheaper than $10, even though the price is almost the same. This pricing psychology method is so effective that William Poundstone discovered it can increase sales by 24 per cent.

Charm pricing even works for traditionally expensive products. For instance, here’s an example of the strategy from JB Hi-Fi, which offsets prices by a dollar to make the deal look more attractive.

Implementation tip: Identify key products or services and adjust their prices to be slightly lower than their rounded number (for example, change $25 to $24.99). Monitor the conversion rate for one month to see if charm pricing is having a psychological impact on sales.

Price anchoring involves presenting a higher-priced item first to create a ‘reference point' in the customer’s mind. This makes the next lower-priced offer seem like a better deal, guiding customers to the preferred option (even if it’s still expensive).

This technique is especially useful in the SaaS and service industries where companies have multiple pricing tiers or subscription packages. You’ll also see this in retail pricing strategies, especially when a supermarket wants to guide you to a cheaper in-house brand.

Price anchoring isn’t always easy to spot. It’s often employed more subtly to draw the eye to one price before the other. For instance, here’s an example of Atlassian’s Jira pricing page.

It’s likely your eyes were first drawn to the Premium offer, as it’s outlined in black with a blue ‘start free trial’ button. When viewed second, this makes the ‘standard’ and ‘free’ packages seem like great deals if you’re looking for a budget option.

Implementation tip: When building a pricing page, make your luxury consumer option stand out visually (with unique colours and larger text, for example). This sets a strong anchor price and helps low and mid-tier prices appear as better deals.

Decoy pricing involves proposing a less compelling option to push customers towards the choice you actually want them to make.

Contrary to strategies like price anchoring, the decoy itself isn’t meant to be attractive here. It exists to make the ‘target’ option look like a more valuable deal by comparison, playing into our tendency to compare relative value rather than the actual value of a product. This makes it particularly useful for membership-based businesses like publishers and SaaS companies.

Dan Ariely’s Predictably Irrational shows off a clear example of this strategy. He describes an experiment in which The Economist offered three subscription options:

1. Online-only for $59
2. Print-only for $125
3. Print + online for $125

The result? Sixteen per cent of participants chose ‘online-only’, and 84% chose ‘print + online’. Not a single participant chose ‘print-only’. However, when the ‘print-only’ option was removed, 68% of students picked the online-only option.

The presence of print-only was a decoy option, and the participants believed ‘print + online’ to be better value-for-money than it actually was. You’ll also see this tactic in cinema popcorn, where a $6 medium popcorn makes a $6.50 large look the clear choice.

Implementation tip: Add an option to your tiers that’s close in price to the package you want customers to choose, but is clearly lower in value. This will nudge buyers towards your intended product without leaving them realising they’ve been influenced.

Odd-even pricing is the proven theory that odd numbers (like $99.99) signal a discount, whereas even numbers (like $100) convey prestige.

We’ve already discussed how setting prices below a round number can convey affordability, but the opposite is also true. Even prices convey stability and luxury. A handbag priced at $1,000, for example, feels like a high-end purchase, whereas a laptop at $999.99 feels like a great deal.

This tactic is particularly powerful for premium brands that want to show their product as indulgent. For instance, Australian skincare brand Aesop markets their products as high-end luxury. You’ll see this reflected in their pricing, which uses rounded numbers like A$60.00.

By contrast, a budget skincare brand like tbh skincare uses odd prices to convey value-for-money and affordability, aligning with its more value-conscious audience.

Implementation tip: Decide whether your product is best positioned as value-for-money or premium, and adjust your pricing to align with that. Odd pricing works best for competitive markets and fast-moving goods, whereas even pricing is more effective for luxury products.

Another tactic that works well for tiered pricing models is the center-stage effect, which is the tendency for consumers to prefer the middle option when presented with a set of choices.

Popularised by Valenzuela and Raghubir in 2009 , this strategy works because people perceive the central option as the safest, most balanced choice.

You’ll see this tactic regularly within SaaS pricing pages, where it's common to have three subscription tiers, with a ‘basic’ package on the left, an ‘enterprise’ package on the right, and a central ‘premium’ package, often tagged as the recommended choice.

Here’s an example of Employment Hero’s payroll pricing plans to show how this works:

The Payroll Premium option stands out as the clear choice, even though it’s neither the most affordable nor the most advanced option.

Implementation tip: You can leverage this approach to draw customers naturally to your most profitable option. Be sure to make your central offer look unique compared with the other tiers, such as by changing its colour or adding a recommended label.

Prestige pricing goes against the usual ‘lower price = better deal’ logic. Instead of aiming to appear affordable, it sets high prices as a signal of superior quality and luxury (even if the product itself is cheap to manufacture).

This strategy appeals to customers who value status and are willing to pay more for products that elevate their lifestyle. Australian fashion brand Zimmermann, for example, sets high prices and rarely runs discounts. Their premium pricing conveys luxury and brand authority in the fashion space.

The key here is having a brand reputation to back up the price. A new business with no credibility might struggle to succeed with this tactic. However, for established brands with a solid following, it can be a powerful way to reinforce desirability.

Implementation tip: Focus on storytelling over affordability as a premium brand. If you can convince consumers that your brand has history and is founded on quality craftsmanship, you can convey a high price point as part of the value, not a barrier.

This strategy involves combining multiple products into one package and providing them at a lower price than purchasing each item individually. The idea is to give the perception of value while encouraging customers to spend more than they’d initially planned.

Bundle pricing is especially popular in the tech and electronics industries. For instance, a new console might ship with two popular games included in the price. It’s also widely used in everything from SaaS products to fast-food meal deals and mobile phone packages.

For instance, Optus regularly releases mobile phone bundle plans with additional features to convince consumers to spend more.

Notice how the plan on the right is bundled together with additional features, plus credit to spend on subscriptions for streaming services? Combined with some additional pricing tricks (like the decoy 200GB option), this bundling makes the 360GB package the clear choice when it comes to value-for-money, even though it’s actually the most expensive option.

Implementation tip: The key here is to bundle together products or services that customers often purchase at the same time, but separately. This increases the likelihood your bundle will succeed. Remember to make the discount clear so there’s no ambiguity.

Scarcity and urgency tactics play on our fear of missing out. By limiting either the availability (think “only three left in stock”), or the time (“sale ends at midnight”), companies can nudge consumers toward hasty purchase decisions that they may not have made otherwise.

As part of her research, Belinda Barton outlines three key scarcity tactics and where they’re most common:

• Demand-based scarcity (limited stock due to popularity) is most effective for utilitarian products like groceries, appliances and skincare
• Supply-based scarcity (think “limited edition”) is best for experiences like concert tickets or luxury events
• Time-based scarcity (“24-hour sale”) is ideal for high-involvement products like digital services, where decisions take longer and deadlines can push action

Demand-based scarcity is particularly common on product pages for clothing. For example, Australia’s The Iconic often uses “1 item left” to indicate that stocks are running low for a particular size.

This tactic is also common when advertising concerts. As another example, Live Nation Australia regularly uses “selling fast” to create a subtle sense of urgency and encourage faster ticket sellouts.

Implementation tip: Use this tactic sparingly. If every product is “low stock” and every deal “ends tonight”, customers will catch on and lose trust. Reserve the strategy for limited promotions and high-profit items so scarcity feels authentic and compelling.

Subscription psychology involves using tactics like free trials, freemium models, and upgrade nudges to lower barriers to entry and gradually encourage users to commit to pricier plans.

Canva is a classic example of this concept in action. The graphic design software is completely free to use. However, many design elements, templates, and images are locked behind the Canva Pro subscription. These elements are still visible in the platform, but they can’t be used, creating a constant sense that you’re missing out on the best features.

This strategy works brilliantly for any business with a long-term subscription revenue model. Free plans and freemium models reduce the perceived risk, helping to hook users faster by showing them the benefit of the core product. Subtle nudges to upgrade will then trigger the desire to unlock additional features.

Implementation tip: Balance is the key here. You need to offer enough features in your free version to keep customers hooked and show the value of your product. However, too much value and your audience won’t see the need to upgrade to a paid plan.

Here’s another interesting psychological bias: customers prefer all-inclusive flat rates over variable pricing, even if that flat rate is more expensive than purchasing items individually.

This comes down to the certainty of knowing that one price covers everything. It reduces cognitive load and perceived risk, making the purchase decision easier. Think of it as paying a premium for the convenience of not having to arrange everything yourself.

A classic example of this tactic comes courtesy of Australia Post. The service offers flat-rate packaging for all packages under 5kg – pricing is based on item size rather than weight.

Will this always be cheaper than paying for postage by weight? Not necessarily. However, it’s consistent and predictable, meaning customers are more than happy to pay for the convenience of knowing exactly how much they’ll spend.

Implementation tip: Combine this strategy with bundling to offer multiple products at a predictable price point. Emphasise this simplicity within your marketing so customers understand the value upfront.

When implementing psychological pricing, the important things are to start small, measure your progress, and be ready to change your strategy as you go. Let’s go through the process step-by-step to discuss how to integrate your chosen tactics effectively.

Start by picking one or more pricing strategies that align with your current position and goal. For instance:

• If you’re positioning yourself as a budget brand, charm pricing and odd-number pricing can highlight affordability.
• If you want to appear as a luxury choice, prestige pricing will reinforce exclusivity and quality.

If you sell subscriptions or SaaS packages, anchoring and the center stage effect can guide customers to your most lucrative plan.

Choose metrics to track that line up with your tactics and goal.

Conversion rate is always going to be the most important KPI here, but you can also track secondary metrics like average order value (AOV), customer lifetime value (CLV), or average revenue per user (ARPU).

This will give you a more complete picture of whether pricing tactics are boosting sales and maintaining long-term stability.

It’s important to remember that the price customers want to pay for your products is never a given. This is why it’s important to test different strategies and experiment with different prices over time.

To do this, A/B test different methods and page layouts over time. For instance, you might decide to test $30 vs. $29.95, or compare how often customers choose a mid-tier subscription plan when it’s positioned in the centre and highlighted as the recommended choice.

Tools like Salesforce Commerce Cloud can help with this process by running controlled tests, segmenting your audience, and surfacing clear insights to help you land on the right pricing strategy for your business.

Use platforms like Commerce Cloud and CRM Analytics to gather data regarding how customers interact with your pricing pages. This will let you see what’s working and what isn’t, see where customers experience the most friction and spot potential areas for improvement. It will also link up consumer behaviour with changes to your pricing structure.

You can also survey your customers directly to gauge their receptiveness to pricing changes and keep tabs on their evolving expectations.

Remember that psychological pricing methods are never set in stone. It’s essential to review, learn, and adapt your processes as customer expectations and brand priorities evolve.

The better you’re able to balance your own revenue goals with your customers’ needs, the better able you’ll be to maintain profitability while building long-term trust.

Psychological pricing is powerful, but it comes with ethical responsibility. While tactics can boost sales and shape perception, there’s a line between persuasion and manipulation that you’ll need to navigate if you want to maintain trust.

Here are four tips for maintaining ethical boundaries while experimenting with psychological pricing.

• Be genuine: It’s important to be transparent with your marketing. Scarcity tactics are effective when genuine, but they can be manipulative if they’re manufactured. The key is to think long-term rather than prioritising short-term revenue wins.
• Transparency builds trust: Instead of simply showing a slashed price on a bundle, explain why the deal is the best value for money. This kind of transparency matters more than ever, especially since 72% of customers trust companies less than they did a year ago .
• Respect customer autonomy: Avoid tactics that leave customers feeling tricked into a purchase. An overly aggressive countdown timer or hidden fee can backfire and damage brand loyalty.
• Use AI the right way: Pricing algorithms can personalise offers for every customer, but it’s vital to train them to avoid unfairly targeting vulnerable groups. Make sure your AI tools are fair, inclusive, and explainable to keep customers on side.

When you get it right, psychological pricing should be about presenting value in a way that feels fair and builds long-term trust.

Psychological pricing is a powerful but accessible way to shape the way customers perceive your brand’s offers. The right tactic can make your product or service look more affordable, appear more desirable, or stand out as a luxury choice, all by altering prices and the way you present them to your audience.

The key is to keep the results measurable so you can learn from your testing and iterate as you go. Solutions like Salesforce Commerce Cloud can equip you with the tools to implement psychological pricing, track the results, and fine-tune your strategies to boost revenue and drive long-term loyalty, all powered by groundbreaking AI.

Watch the Commerce Cloud demo today to see consumer psychology meet performance.