Psychological Pricing

Price says something regarding the product. For instance, many consumers utilize price to judge quality. An Rs1000 bottle of perfume can contain just Rs300 worth of scent, but some people are eager to pay the Rs 1000 because this price shows something special.

In using psychological pricing, sellers regard as the psychology of prices and not easily the economics. For instance, one study of the relationship among price and quality perceptions of cars found that consumers perceive higher-priced cars since having higher quality. By the similar token, higher-quality cars are perceived to be even superior priced than they in fact are. When consumers may judge the quality of a product by verifying it or by calling on past experience with it, they utilize price less to judge quality. While consumers cannot judge quality because they lack the information or dexterity, price becomes significant quality signal:

Another aspect of psychological pricing is reference pricing-prices that buyers carry in their minds and refer to when looking at a given product. The reference price might be formed by noting current prices, remembering past prices, or assessing the buying situation. Sellers may influence or use these consumers' reference prices while setting price. For instance, a company can display its product next to more costly ones in order to imply that it belongs in the same class. Department stores frequently sell women's clothing in separate departments differentiated by cost: Clothing found in the more costly department is supposed to be of better quality. Companies may also influence consumers' reference prices by stating big manufacturer's suggested prices, indicating that the product was originally priced very higher, or by pointing to a competitor's higher price.