Savvy to Sneaky: 10 Ways Sellers Use Price to Make Us Buy

Marketers have many tools at their disposal to encourage consumers to buy products. They can make a particular phone appear to be more popular than it really is, instill a fear of missing out (FOMO) with a limited-time offer to join a gym, or create advertising that makes us believe buying designer clothes will make us more successful. Many other marketing approaches manipulate people’s perception of value. Here are some widespread pricing tactics that sellers use—roughly ordered from relatively transparent to deceptive.

1. Odd pricing: One of the most commonly seen (and very transparent) examples of psychological pricing is the left-digit effect, also known as odd pricing. This refers to the idea that consumers tend to focus on the leftmost digit in a price and make a decision that is most influenced by that digit. The human brain processes information from left to right. Consequently, consumers judge the difference between $4.00 and $2.99 to be larger than that between $4.01 and $3.00, even though it’s $1.01 in both instances. An example of the left-digit effect in pricing could be a phone case priced at $9.95 instead of $10. The seller hopes that the loss in revenues from setting the price five cents below $10 will be compensated by the increase in sales from the left-digit bias.
2. Round pricing: While the prevailing wisdom in marketing may favor prices just below a round number, there are exceptions. Another theory suggests that consumers perceive round prices as more convenient, as they are easier to process, which saves time and effort during transactions. Research shows that round prices increase sales in purchase situations where convenience is important, thinking capacity is restricted, or the purchase decision is driven by feelings. Restaurant menus frequently use easy-to-process prices, often by dropping the decimal altogether and omitting currency symbols.
3. Price bundling: Another pretty basic and innocuous marketing strategy is price bundling. Two or more products are combined to be offered at a lower price than if the same products were sold separately. Examples include everything from burger + fries + soda combo meals to flight + hotel + rental car vacation packages. Consumers perceive these deals as better value, which can increase sales volumes for companies. Price bundling can be a win–win for sellers and buyers. However, consumers may end up buying more than intended.
4. BOGOF: An important part of pricing strategy is about discounts. This includes the well-known buy-one-get-one-free (BOGOF) offers we’ve all seen in supermarkets, such as getting two bottles of laundry detergent for the price of one. In academic research, work on the so-called zero-price effect shows why this is so successful. The concept of zero price has a powerful emotional effect on consumers. Dropping a price from five cents to zero cents has a much bigger impact than from $1.05 to $1.00, for example. Similarly, BOGOF is used in the hope that offering a bottle of laundry detergent for $10 and the second one free will generate more sales than a 50-percent price discount.
5. Price anchors: Our price perception is often relative to other options available to us. Sellers take advantage of this when they draw your attention to a high-priced item that serves as a reference point or anchor. For example, a store may display a designer handbag priced at $1,000 next to a lower-priced handbag priced at $300. The store uses the higher price as an anchor to make the $300 handbag seem like a good deal in comparison. A simple tactic, but potentially quite effective for the retailer.
6. Shrinkflation: Sometimes value isn’t evident in paying less, but in not paying more. Food manufacturers are well aware that consumers don’t like price hikes. Instead of raising prices, it’s recently become a common practice to give consumers less for their money. The term “contents-reduction strategy” used by manufacturers sounds like a euphemism to consumers who noticed how the empty space in their potato chips package has gradually increased. Shoppers have an innate bias toward focusing on price and would rather get less than pay more. But they don’t like to feel tricked.
7. Decoy effect: One of the most frequently cited examples in applied behavioral science is the decoy effect. This effect can be observed if a person’s preference for one option over another changes when we add a third option that is similar but less attractive. Price is often one of those attributes. Let’s say a retailer offers a basic $30 diary-and-pen bundle and a fancier $80 one. The retailer now wants to increase the sale of the fancy bundle without dropping its price. Applying the decoy effect, the retailer could simply add a similar fancy diary with no pen included at $80 to make the $80 diary-and-pen bundle seem like a better buy. This approach is only effective if people evaluate their options in relative rather than absolute terms. In any event, using decoys is pretty clever, but consumers may think it’s manipulative.
8. Hidden fees: There’s competition among companies to keep prices low and attract customers. That’s just the nature of business. As the example of shrinkflation shows, there are alternatives to raising prices. One way in which companies have been trying to keep their prices (or appearance thereof) low is by turning features that were previously included in a product or service into hidden fees or extras. One great example from recent years is airline travel. At first glance, the price of your ticket may be $250, but once you start the purchase process, you realize that you’ll be charged extra for baggage. As this practice becomes the norm, consumer expectations will catch up, but it’s one of many marketing practices that can easily backfire in the long run.
9. Reference pricing: A less ethical approach related to price anchors is misleading reference pricing that creates a discount illusion. A computer monitor may be shown with a $600 reference price (list price, MSRP, or original price) and a much lower $500 “our price,” for example. When you search online for the model, however, you notice that no retailer actually sells it at the reference price at all. Another deceptive price tactic is to lower the price shortly before a sale, which artificially creates a “was–now” reference price. The outcome is obvious: Shoppers think they’re getting a good deal when in reality they may get much less of a discount or none at all.
10. Bait and switch: Have you ever visited a retailer because you wanted to take advantage of a sale? Of course you have! Maybe you received a flyer from the local sofa store with $300 discount advertised for a particular couch you liked. When you get to the store, you’re presented with a couch that’s inferior to what you expected and offered a better alternative. Or you’re told that the item is out of stock—which may be true or just a clever way to offer you a more expensive one that isn’t on sale. If it’s an ingenuine offer, it’s called bait and switch. The practice is a violation of the Consumer Fraud and Deceptive Business Practices Act in the United States and is illegal in many other countries as well.

From a consumer's perspective, the pricing tactics reviewed here fall onto a continuum from relatively ethical to unethical and transparent to manipulative. They range from very widespread and innocent approaches (e.g., odd pricing, price bundling, and BOGOF), to those with the potential to tick off consumers (e.g., price anchors, shrinkflation, and hidden fees), to tactics that are outright deceptive and sometimes illegal (e.g., misleading reference pricing or bait and switch).

Understanding how prices can influence our purchasing decisions is key to being an informed consumer who gets value for their money and avoids falling prey to manipulative marketing tactics. Companies also have a responsibility to be transparent and honest with their pricing strategies. In many countries, corporations and retailers are increasingly held accountable for any unethical practices through legislation. As far as most other practices are concerned, it simply pays to be a savvy consumer.