Pricing Psychology

Pricing Psychology

Which numbers should you use? How high should it be? Should it be rounded? This guide has 42 tricks to help you choose the best price.

Nothing in this world has concrete meaning.

At the end of the day, price is merely a perception. Nothing more. Nothing less.

And that’s great news. While large companies can afford expensive pricing research, you can apply psychology.

In this guide, you’ll learn why innocent factors—fonts, colors, digits—can make prices more appealing, boosting the sales of your product.

Here’s a video summary:



Reference Prices

You see a carton of eggs for $3.

Is $3 a good deal? How can you tell? What’s happening in your brain?

Answer: Reference prices.

You compare $3 to a “standard” price that you derive from:

  • Previous Prices. How much were eggs last time?
  • Advertised Prices. What price were you promised?
  • Estimated Price. What price were you expecting?
  • Adjacent Prices. How much are competing eggs?
  • Nearby Numbers. Any numbers in the vicinity?

You merge all of those sources into a single magnitude. Then you compare this “reference price” to the current product so that you can evaluate the price (see Briesch, Krishnamurthi, Mazumdar, & Raj, 1997; Mazumdar, Raj, & Sinha, 2005).

Prices emerging from visual shapes

Sensory Origin

Numbers are abstract concepts.

In order to learn these concepts, you needed a sensory foundation. Today, in your brain, numbers are resting upon sensory concepts — and this structure influences your perception of prices.

This mechanism is complex, but you can refer to my video on The Cognitive Origin of Numbers.



$50 with tape measure of font size

Show Prices in Small Fonts

Your brain confuses visual size for numerical size.

If you see $50 in a large font, you think: Hmm, how big is this price? Something feels big. The price must be high.

Generally, you should display prices in a small font so that they seem numerically smaller (Coulter & Coulter, 2005).

Caveat: This tactic might only work with single products. Large fonts might work better for multiple products because customers judge the difference between those prices: Hmm, how big is the price difference? Something feels big. The difference must be big.

Position Prices Near the Top or Left

Prices seem cheaper in different locations, particularly on the top and left.

Why the Left?

Objects on the right pull downward:

…because our eyes enter a visual field from the left, the left naturally becomes the anchor point or ‘visual fulcrum.’ Thus, the further an object is placed away from the left side (or the fulcrum), the heavier the perceived weight (Deng & Kahn, 2009, p. 9).

Prices might feel heavy toward the right:


Plus, we conceptualize numbers on a horizontal ruler — they get larger from left to right (assuming that you read from left to right). Thus, small numbers are associated with the left:

…people typically see small numbers to the left of larger ones, [so] they are likely to associate small numerical values with locations on the left (Cai, Shen, & Hui, 2012, p. 723)

Caveat: One competing mechanism is simulation fluency. You prefer stimuli to be located on the same side as your dominant hand (Casasanto, 2009). Since most people are right-handed, I suspect that prices might “feel better” toward the right.

Why the Top?

In one study, cookies seemed lighter toward the top of a package (Deng & Kahn, 2009).

Why? Because the cookies seemed lifted to this location — so, naturally, they must be lighter.

Prices might inherit this effect.

One study confirmed that prices seem expensive in the bottom-right (Park & Ma, 2019). But we need more research — another study found that prices seemed cheaper at the bottom (Barone, Coulter, & Li, 2020).

Remove Commas From Prices

Prices seem cheaper without commas (e.g., $1499; Coulter, Choi, and Monroe, 2012).

Sure, the written length is shorter. But more importantly, the phonetic size is also shorter:

  • $1,499: One-thousand four-hundred and ninety-nine (10 syllables)
  • $1499: Fourteen ninety-nine (5 syllables)
$20 near benefit of "low friction"

Group “Small” Elements with the Price

Be careful with any words near your price. Choose words that depict a small size (e.g., “low,” “small,” “tiny”).

In one study, an inline skate seemed cheaper when “Low Friction” appeared near the price. The price seemed higher with “High Performance” (Coulter & Coulter, 2005).

The reason is complex, but you can refer to Chapter 4 of my book The Tangled Mind to learn the details.

Two T-Shirts for $25

Insert Alliteration Into the Price

Alliteration feels good.

Something just “feels right” — and we misattribute this pleasant sensation to the context.

Research confirms that alliterative prices are effective: Customers were more likely to buy two t-shirts for $25 because of the matching “t” sounds (Davis, Bagchi, & Block, 2016)

$3 pizzas with 5 toppings for $15

Show Two Multiples of the Price Nearby

Compare these two pizza advertisements:

4 small pizzas with unlimited toppings for $24 vs. 4 small pizzas with up to 6 toppings for $24


The left ad is economically superior because people have “unlimited” toppings. However, people were more likely to buy the second deal with “6” toppings (King & Janiszewski, 2011).

See the culprit?

It involves multiples of the price.

Your brain stores common arithmetic problems:

Over time, children are drilled on simple problems so that an association develops between operands (e.g., 2 x 6) and results (e.g., 12). These stored associations are called “number facts” (Baroody 1985).

Exposure to two numbers (e.g., 2 and 6) immediately activates the sum (e.g., 8) and product (e.g., 12).

In the pizza ads, the price of $24 seemed better when the ad was showing two multiples (e.g., 6 and 4). Customers misattributed this sensation: Hmm, something feels right. I must want to buy this deal.

When possible, show two multiples of your price:

  • $15: 3-Day Sale for $5 Off
  • $120: Get 4 Weekly 30-Minute Coaching Calls
  • $500: Get 5 Bonus PDFs for Free ($100 Value)

Caveat: Show two — and only two — multiples. If your price is $12, many multiples (e.g., 2, 3, 4, and 6) will weaken the activation of $12.

Display Red Prices to Men

Men prefer prices in red fonts:

Men seem to process the ads less in-depth and use price color as a visual heuristic to judge perceived savings (Puccinelli et al., 2013, p. 121).

Men make decisions quickly, and they assume that red prices indicate savings (see Van Droogenbroeck, Van Hove, & Cordemans, 2018 for a replication).

Caveat: All prices need to be red. Changing the color of one price could backfire (Ye, Bhatt, Jeong, & Zhang, 2020).

$20 for wine that isn't being heavily promoted

Deemphasize the Price of Emotional Products

Emotional products have strong benefits, but weak economic value. Therefore, orient customers toward the benefits instead of the price.

How? Here are some ideas.

1. Reduce the Saliency of Prices

Do you sell jewelry? On your website, don’t emphasize the prices.

Jewelry price in small font size


2. Show Products Before the Price

According to fMRI of shoppers, the first exposure — price vs. product — dictates our decision criteria:

  • Product first? We focus on benefits.
  • Price first? We focus on economic value.

Therefore, show emotional products before prices so that customers focus on the benefits (Karmarkar, Shiv, & Knutson, 2015).

Do the opposite for rational products. Show prices so that customers focus on the economic and rational value.

3. Focus on Time and Usage

Avoid references to money. Instead, emphasize the duration of time that customers will spend.

Researchers alternated three signs for a lemonade stand:

  • Time: “Spend a little time and enjoy C & D’s lemonade”
  • Money: “Spend a little money and enjoy C & D’s lemonade”
  • Neutral: “Enjoy C & D’s lemonade”

The “time” sign attracted twice as many people (who paid twice as much; Mogilner & Aaker, 2009).

Donate 29 to feed children

Remove the Currency Symbol When Possible

You should typically include the currency symbol in your prices — these symbols help customers understand when a number is, indeed, a price.

But if your number is clearly a price, perhaps you could remove the symbol (Yang, Kimes, & Sessarego, 2009). Removing this symbol reduces the pain of paying, distracting people from the cost.

Perhaps this tactic works best in luxury contexts, (e.g., high-end restaurant).


Price near the words "Join 5,487 happy customers"

Expose People to Any High Number

Nearby numbers influence the reference price.

In one study, researchers sold music CDs on a boardwalk in West Palm Beach. Every 30 minutes, an adjacent vendor switched the price of a sweatshirt between $10 or $80.

Turns out, the $80 sweatshirt boosted sales of CDs because they seemed cheaper (Nunes & Boatwright, 2004).

But surprisingly, this anchoring effect works with any number. In another study, people reflected on the last two digits of their social security number. If those digits were high, they were willing to pay a higher amount for products.

This anchoring effect occurs subconsciously — it even happened when researchers subliminally exposed people to a high number (Adaval & Monroe, 2002).

Therefore, show high numbers near your price:

  • Join 5,487 happy customers
  • Invoice #8986
  • We donated $100,000 to charity

Those large numbers raise the reference price, which makes your actual price seem cheaper.

$30 original price followed by $25 sale price on right

Place a Larger Number on the Left

Displaying a sale price?

Place the original price (the larger number) on the left. It’s called the subtraction principle: Customers can subtract these numbers more easily, which makes the difference seem larger (Biswas et al., 2013).

Follow this technique for quantities, too. Which order is better:

  • $29 for 70 items
  • 70 items for $29

Answer: The second sequence (Bagchi & Davis, 2012).

Even though price and quantity are different concepts, the large quantity (e.g., 70) makes the price seem cheaper.

Items in descending order of price

Show Higher Prices Before Lower Prices

Customers are more likely to choose an expensive option when you sort prices from high to low.

Over an 8-week span, researchers alternated beer prices on a menu. They maximized revenue when prices were sorted from highest to lowest (Suk, Lee, & Lichtenstein, 2012).

Two reasons.

First, initial prices establish a reference price. Higher initial prices? Higher reference prices.

Customers use these initial prices to evaluate subsequent prices.

Second, there’s loss aversion. While scanning products that get higher in price, customers lose the ability to pay a lower price. They feel pressured to pounce on a cheaper item before they get too expensive.

Showing prices in a decreasing sequence can trigger the reverse effect. Each new product feels like a loss in quality. Customers feel pressured to pounce on an option before they lose too much quality.

Three plans. Two with white backgrounds, one with green background

Distinguish the Most Expensive Option

I just argued that you should sort prices from high to low.

But it’s not necessary. The real effect stems from the order in which prices are evaluated.

You could achieve the same effect by adding a visual distinction to the most expensive option. That way, customers evaluate this product first (and it inflates their reference price).

Use this trick when you need to keep prices in ascending order.

$85 blender that seems similar to $65 blender

Offer a Similar (Yet Expensive) Version

You might be familiar with a popular study involving three subscriptions to Economist magazine:

  • $59 — Digital
  • $125 — Print
  • $125 — Print and Digital

At first glance, it seems wrong. You can buy the digital and print for the same price as the print subscription.

But alas, it’s not a mistake.

Although nobody chooses the “print” subscription, this decoy option shifts demand toward the “print and digital” subscription — which is more expensive than the digital subscription (Ariely, 2008).

Consider adding a similar, yet more expensive version of your product to make your existing product seem like a better deal.

Or $160 per day

Mention the Daily Equivalence

Frame your price in daily terms (e.g., $1.60/day; Gourville, 1998). Or compare this daily price to a petty cash expense, such as a cup of coffee (Gourville, 1999).

Those strategies trigger an anchoring effect: Customers compare this daily value to the reference price, which seems like a better deal.

Don't Bundle Cheap and Expensive Items

Selling a $500 home gym? Don’t bundle it with a $5 fitness DVD (Brough & Chernev, 2012).

Customers don’t sum these values. They average them. Therefore, cheap items detract the value of expensive items.

Cash to credit card

Create a Payment Medium

You can transform the payment into a separate medium (e.g., monthly credits, gift cards).

Customers are more likely to spend money from a separate medium because the payment feels less painful (Nunes & Park, 2003).

Perhaps you could require new customers to deposit a refundable $10 into their account, which they can use for services. Customers will be more willing to spend this money because it resides in a separate medium.

Salad and cupcake combo with discount on cupcake

Attribute Discounts to Emotional Products

We want to buy emotional products, but we feel guilty (Khan & Dhar, 2006).

Therefore, in product bundles, attribute a discounted price to the emotional product.

…framing the discount on the hedonic item provides a justification required to reduce the guilt associated with the purchase of such items. (Khan & Dhar, 2010, p. 18)

Billing date at beginning of month

Charge Customers Before They Consume

Customers should pay before using your product. For one, you’re more likely to get paid. Always nice.

Second, customers will be happier. While prepaying, they can look forward to the benefits. If they already consumed those benefits, nothing will numb the pain of paying (Prelec & Lowenstein, 1998).

If you charge customers every month, charge them at the beginning of the month.

$15 with Sewing at $1.80 and transportation at $2.03

Describe the Costs of Your Product

Customers prefer prices that are determined by material costs, rather than supply and demand (Xia, Monroe, & Cox, 2004).

Perhaps you can describe your costs:

…consumers have little knowledge of a seller’s actual costs and profit margins…Therefore, sellers making the relevant cost and quality information transparent helps (Xia, Monroe, & Cox, 2004, pp. 9).

Update (2020): Researchers at Harvard tested this claim. And, indeed, it works (Mohan, Buell, & John, 2020). A retailer boosted sales in an email blast by describing the costs for their wallet (e.g., leather – $14.68, construction – $38.56, duties – $4.26).

Encourage Customers to Budget Early

Budgeting is good, right?

Not always. Sometimes it increases spending.

Why? Early budgeting separates you from this money. As you move further away from these funds, payments feel less painful. In one study, students spent more money on a class ring when they budgeted early (Chloe & Kan, 2021).

Perhaps hotels and rental car agencies should offer upgrades to customers who make reservations in advance. Or perhaps overly frugal customers should budget for a vacation farther in advance to reduce the pain of spending money.


$3.00 being reduced to $2.99

Reduce the Left Digit By One

Why do marketers use “charm” prices, like $2.99 or $49.95? Why not $3 or $50?

Answer: The leftmost digit is smaller.

Your brain encodes prices before you finish reading the numerals. Therefore, a one-cent difference between $2.99 and $3.00 can feel like a one-dollar difference:

…while evaluating “2.99,” the magnitude encoding process starts as soon as our eyes encounter the digit “2.” Consequently, the encoded magnitude of $2.99 gets anchored on the leftmost digit (i.e., $2) and becomes significantly lower than the encoded magnitude of $3.00 (Thomas & Morwitz, 2005, p. 55).

Choose Prices With Fewer Syllables

Prices seem cheaper with fewer syllables (Coulter, Choi, and Monroe, 2012).

Consider two prices:

  • $27.82: Twenty-seven eighty-two (7 syllables)
  • $28.16: Twenty-eight sixteen (5 syllables)

Intriguingly, $28.16 feels numerically smaller because of the smaller phonetic size. You don’t need to say the price out loud — your brain encodes the phonetic version regardless (Dehaene, 1992).

$5 plus $2 fee

Divide Price Into Smaller Units

Reduce your “primary” price as much as possible. Perhaps you can divide this number into smaller units (e.g., fees).

These “partitioned prices” generally work better (Morwitz, Greenleaf, & Johnson, 1998).

Here are some examples.

1. Separate the Shipping Cost

Researchers tested bidding structures in online auctions:

  • $0.01 with $3.99 shipping
  • $4 with free shipping

Auctions with separate shipping generated more revenue (Hossain & Morgan, 2006). Other research confirmed those results (Ward & Clark, 2002).

Caveat: Those studies might be outdated. Today, many customers expect free shipping.

2. Offer Prices in Installments

Instead of selling a course for $1,250, sell the course for 12 payments of $115. Customers will compare the installment price ($115) to the reference price.

$365,478 is more precise than $365,000

Be Precise With Large Prices

Based on 27,000 real estate transactions, specific prices (e.g., $362,978) are more effective than rounded prices ($350,000; Thomas, Simon, & Kadiyali, 2007).

Why? Maybe buyers are less likely to negotiate?

That’s what I thought — but nope. We just associate precise numbers with small values.

Think about it. You’re more likely to use specific numbers when dealing with small numbers (e.g., 1, 2, 3). These prices just feel smaller.

$62 has a 2 after a 6

Place Low Numerals After Right-Facing Digits

Human bodies guide attention.

You instinctively look in whichever direction a body is facing (Langton, Watt, & Bruce, 2000).

A similar effect happens with digits (Coulter, 2007). Digits can face particular directions:

  • Left: 2, 3, 4, 7, 9
  • Center: 1, 8, 0
  • Right: 5, 6

…and these orientations guide attention.

For example, rightward digits (e.g., 5, 6) push attention toward the right. In prices, these digits push attention toward the later digits — and customers are more likely to round up or down accordingly. Therefore, place small numerals after rightward digits so that customers round down to a lower price.

Conversely, leftward digits (e.g., 2, 3, 4, 7, 9) keep attention toward the left. In prices, these digits push attention away from the later digits. You can place large numerals at the ends of these prices because customers will ignore them.

$55 for Fred

Tailor Prices Toward Names or Birthdays

Customers prefer prices that contain the same letters in their name or birthday:

…consumers like prices (e.g., “fifty-five dollars”) that contain digits beginning with the same first letter (e.g., “F”) as their own name (e.g., “Fred,” “Mr. Frank”) more than prices that do not. Similarly, prices that contain cents digits (e.g., $49.15) that correspond to a consumer’s date of birth (e.g., April 15) also enhance pricing liking and purchase intentions. (Coulter and Grewal, 2014, p. 102)

Based on implicit egotism, we prefer things that resemble us — including our name or birthday (Pelham, Carvallo, & Jones, 2005). Some researchers argue that this principle dictates our lives (e.g., people named Dennis are more likely to become dentists; Pelham, Mirenberg, & Jones, 2002).

Giving a quote? Perhaps you could adjust the numerals to match their name or birthday (after a quick glance at Facebook).

$20 for wine

Use Round Prices in the Right Context

Round prices (e.g., $50) are easier to process than specific prices (e.g., $49.63). Thus, round prices work better in these scenarios.

1. Emotional Purchases

Round prices just “feel right” — a sensation that matches the nature of emotional products. Customers preferred champagne with a round price ($40), yet preferred a calculator with a sharp price ($39.72 and $40.29; Wadhwa and Zhang, 2015).

2. Convenience Purchases

Round prices trigger an “easy” sensation, and customers misattribute this feeling to the transaction — the purchase seems faster and easier (Wieseke, Kolberg, & Schons, 2016). Therefore, use round prices when customers prefer a fast checkout.

3. Social Benefits

Round prices are divisible by other numbers, and customers misattribute this connectivity. Customers prefer round prices for social products (e.g., conference tickets) because they confuse the numerical connectivity for social connectivity (Yan & Sengupta, 2021).

Two packs of gum for $2.95 and $2.93

Add Slight Price Differences in Your Assortment

You prefer assortments with similar options (Sagi & Friedland, 2007).

In this scenario, you receive the same benefits from every option — so you don’t lose any benefits by choosing an option.

In one study, researchers asked two groups if they wanted to buy gum. Each group had two options:

  • A: Same price (e.g., 63 cents)
  • B: Different price (62 cents vs. 64 cents)

Turns out, the different prices boosted purchases (Kim, Novemsky, & Dhar, 2012).

But why? Shouldn’t similar prices perform better? Surprisingly, no.

Paradoxically, the packs seemed less similar with the same price. In this scenario, customers struggled to distinguish these packs so they searched harder for differences.

However, slightly different prices can reduce this urge. Customers remained focused on similarities, so they are more likely to choose an option because they won’t lose benefits by choosing an option.

$80 to $82 to $84 across three years

Raise Your Prices in Small Increments

Adjust prices based on the just noticeable difference (i.e., the difference that’s just noticeable)

If your price is $11, an increase to $20 will be more noticeable than an increase to $12.


It seems obvious, but many businesses fail here. They are scared to raise their price, so they wait until it’s absolutely necessary. By that point, however, they need to raise their price by a wide margin.

So, what should you do?

Use frequent (yet smaller) prices changes. Avoid waiting until the moment of desperation.

Plus, if your price stays the same for years, then customers become accustomed to this price. Any change will be highly noticeable.

Package getting smaller

Downsize Features Besides Price

You can change prices without changing the numerals.

If customers are highly price sensitive, adjust a feature that is less noticeable, like physical size. Lower costs will increase your margins without alerting people to the negative change.

If you downsize physical size, reduce the size by all three dimensions — height, width, length — which becomes less noticeable (Chandon & Ordabayeva, 2009).

But obviously, be transparent and use your judgment. Don’t take advantage of customers.


$50 regular price in different font and color to $25 sale price

Make Sale Prices Look Different From Original Prices

Add visual distinctions to sales prices (e.g., color, size, font; Coulter and Coulter, 2005).

Why? Think of infomercials.

Viewers typically see the current problem in black-and-white, yet the new solution in vibrant color:

I call it contrast fluency. Your brain misattributes these visual distinctions to abstract distinctions: Hmm, something seems different. This product must make a big difference.

Likewise, with numbers: Hmm, this sale price feels different. It must be numerically different.

$50 regular price with space between the $25 sale price

Add Space Between Discounted Prices

You conceive numbers along a horizontal ruler.

Thanks to this cognitive structure, you confuse visual distance for numerical distance: Numbers seem numerically further when they are visually further from each other (Coulter & Norberg, 2009).

Add space between your original and sale prices so that the numerical gap seems larger.

$25 sale price below $50 original price

Place Sale Prices Below Original Prices

When possible, arrange discounts vertically (Feng, Suri, Chao, & Koc, 2017).

Vertical numbers are easier to subtract because of the digit-by-digit comparison. And easy calculations enlarge the gap between numbers (Thomas & Morwitz, 2009).

Caveat: Horizontal formats work better for small discounts because they impede the calculation.

Reduce Every Digit in the Discounted Price

You compare numbers in a digit-by-digit manner.

Therefore, reduce every digit in your sale price (see Korvorst & Damian, 2008). If your price is $465, aim for a discounted price in every digit.

Caveat: Perhaps keep the rightmost digit the same. It will ease the subtraction of the leftmost digits (Hung et al., 2021).

Was $133; Now $122

Offer Discounts With Low Right Digits

Show small numerals in the rightmost digits of your sale price. Small digits enlarge the perceived gap:

…because 3 is 50% greater than 2, and 8 is 14% greater than 7, the absolute difference between 2 and 3 is perceived to be greater than that between 7 and 8, even though their absolute differences are identical. (Coulter & Coulter, 2007, p. 163)

Follow the Rule of 100

Should discounts be percentages or absolutes?

Consider a $150 blender. Should you offer 20% off? Or an equivalent $30 off?


  • Over $100? Give absolutes (e.g., $30)
  • Under $100? Give percents (e.g., 20%)

In both cases, you show the higher numeral. For a $50 blender, 20% off is the same as $10 off — yet 20% is more persuasive because it’s a higher numeral. For a $150 blender, the absolute discount ($30 off) is a higher numeral (González, Esteva, Roggeveen, & Grewal, 2016).

Was 25% higher

Mention the Increase From the Discounted Price

Most discounts emphasize the decrease in price: “Now 20% off.”

But the reverse framing — “Was 25% higher” — is more persuasive because it shows a higher numeral (Guha et al., 2018).

It's $20 because of clearance

Provide a Reason for the Discount

Explain why you’re offering a discount.

This discount will seem temporary, so it won’t impact the customer’s long-term reference price. Without this reason, your discount will make future prices seem more expensive.

Plus, if the discount seems temporary, customers will be more apt to pounce on it. Perhaps you could mention a “clearance” sale. Or you could refer to supplier price cuts:

[some stores] often convey the message that additional cost savings they are able to obtain from suppliers are being passed on to customers… presumably to minimize the negative effects of promotions (Mazumdar, Raj, & Sinha, 2005, p. 88)

25% off

Offer Discounts in Round Numbers

Recall that specific prices (e.g., $21.87) seem smaller (Thomas, Simon, & Kadiyali, 2007).

Follow the opposite approach for discounts. Since you want to enlarge discounts, choose round numerals.

Plus, it will be easier to calculate — which will make your discount seem larger (Thomas & Morwitz, 2009).

10% off, then another 20%

Give Two Discounts in Ascending Order

Two gains are often preferred to a single lump sum (Kahneman & Tversky, 1979).

Therefore, double discounts can be helpful: Perhaps offer 10% then an extra 40%.

If possible, arrange these discounts in ascending order: 10% then 40%. Ascending momentum makes the total discount seem larger (Gong, Huang, & Goh, 2019).

Offer Discounts Toward the End of the Month

Payments are more painful when they come from a small budget (Soster, Gershoff, & Bearden, 2014).

Discounts are more effective toward the ends of months because people have depleted their monthly budgets, and they are seeking ways to save money.

Or give free trials at the beginnings of months when budgets are higher:

[free trials] might be better timed at the beginning of the month, or immediately after consumers receive tax refunds, in order to ensure that budgets are not approaching exhaustion at the time of purchase (Soster, Gershoff, & Bearden, 2014, pp. 672-673).

$5 off $20 or $10 off $50 or $25 off $150

Arrange Discounts in Tiered Amounts

Suppose that customers get $50 off when they spend $200.

In this scenario, customers need to spend $200 — which might be tough to imagine. In order to make this discount more realistic (and thus enticing), businesses need to strengthen the mental imagery of spending $200.

How? They can offer tiered discounts.

  • $50 off $200
  • $25 off $150
  • $10 off $50
  • $5 off $20

Customers might struggle to imagine the $200 threshold, but the lowest tier — $20 — is easy to imagine.

And now it gets sneaky: Once they imagine spending $20, it becomes easier to imagine the next threshold of $50.

Then it becomes easy to imagine $150. Then $200.

Lower tiers provide a sequence of images that transform a high threshold into a feasible reality.

Deep Dive: Pick up my book Imagine Reading This Book to learn the detailed mechanism behind this “simulation fluency.”

End Discounts Gradually

Consider the price of a television. Most businesses choose one of two pricing strategies:

  • Hi-Lo Pricing. $999…then $799…then $999.
  • Everyday Low Pricing. $919 every week.

But recently, there’s a new strategy called steadily decreasing discounts. You gradually retract a discount:

$999…then $799…then $899…then $999

Over a 30-week span, researchers tested all three pricing strategies for a $24.95 wine bottle stopper. Revenue was highest with the gradual retraction (Tsiros & Hardesty, 2010).

Don’t Discount Premium Products

Retracting discounts can be harmful. Customers might wait for the next discount or choose a competitor.

This detriment is particularly common for premium products (Wathieu, Muthukrishnan, & Bronnenberg, 2004).

Discounts on premium products are less common, so this scenario pushes attention toward prices — which doesn’t help when your price is already high.

If you sell premium products, avoid discounts. Keep emphasizing the quality of your product.