The Pricing Psychology Guide for Ecommerce Websites

The Pricing Psychology Guide for Ecommerce Websites

Your customer is going to make a purchase decision based on two basic factors. The first is the quality of the product and the second is the pricing.

Millennial audiences are much smarter and they always compare prices before they click on the buy button.

You will make the worst decision of your life if you believe that your customers are always happy to pay for your product no matter whatever price you keep.

This guide will help you to create a pricing structure to convince your customers and pull them towards a sale.

Reduce the Left Digit by One

Whenever you are setting the price of the product, end it at 9, 99, or 95. This is what we call charm pricing. Also, reduce the left digit by one as charm pricing is most effective when the left digit is reduced by one. Here are some examples that better illustrate this point:



Old Price New Price
$1 $0.99
$5 $4.99
$30 $29.99
$50 $49.99

Highlight Maximum Product Features For The Minimum Price

People always buy benefits, not products.

It is important for you to highlight all the important features of the product and tie it up with the lowest possible price that the customers can’t ignore.

Try Anchoring

Anchoring means artificially inflating a product price and placing it next to the product that you wish to sell. The artificially inflated price will serve as a medium of comparison and will allow the customers to take a decision in your favor. Please refer to the below table for an example.

Product A Product B (with inflated price)
$200 $1,000
$150 $750


Anchoring is an integral part of the entire decision-making process and people often refer to the first piece of information when taking decisions. Anchoring is a smart strategy that allows you to direct your customers toward the product that you want them to buy.

A study was published in the WSJ which proves the worth of this tactic where the sales of a $275 bread maker were almost doubled when a similar bread maker with marginally better features priced at $429 was placed next to it.

Opt For Dynamic Pricing

Dynamic pricing is automated and considers a lot of data before setting the price of the product. You can set dynamic pricing based on the following factors:

  • Happy Hour Pricing: You can offer a discounted price at specific times of the day when the sales are low. For example, if the sales drop after 11 PM then you can start a happy hour pricing from 12PM-1AM in order to increase the sales.
  • Geography-Based Pricing: You can adopt different prices based on the supply and demand for products in different countries, states and cities.
  • Behavior-Based Pricing: Image a customer visiting your site 5 times in the past 2 days. This means the customer is genuinely interested in buying a product, all you need is to send an email or SMS containing a discount code to complete the purchase. Automated emails can be sent depending on user behavior and cart activity. This convinces the customer to pull them towards the sale.
  • Peak Pricing: If a particular product is selling like hotcakes then it makes sense to increase the price of that product until the demand and supply hit the equilibrium.

Separate the Shipping Costs

When you separate the shipping costs from the product cost then the price automatically looks reduced. This has a positive psychological effect on the minds of the customers and they can end up buying the product.



Old Price New Price (with separate shipping cost)
$18 $14 + $4 shipping
$25 $20 + $5 shipping


Adopt The Decoy Pricing Strategy

Dan Ariely in his famous TED talk shared his views about The Economist’s decoy pricing strategy where the newspaper offered 3 choices for its subscriptions:

  • subscription (online access) for 1 year – $59
  • Print subscription for 1 year – $125
  • Print and web subscription for 1 year – $125  

It is clear from the above example that people are most likely to choose the 3rd option because it offers the maximum value. The 2nd pricing option is not useless but helped people make a choice. This is what we call the Decoy pricing strategy that lets people decide on an option.

If you are selling subscription-based products then it is recommended to adopt the Decoy pricing strategy and add an extra offer (decoy offer) next to the package that you want the people to buy.  

Some Pricing Strategies For Risk Takers

If you are ready to take the risk then here are some pricing strategies that can do wonders.

Increase the Prices of Your Top Selling Products

If you raise the price of your product by 1% then you are going to increase your average profits by 11%. These are huge numbers and store owners must not shy away from increasing the prices of their products.

Prepare a list of your top-selling products by looking at the sales data and increasing their prices by 1%.

Precaution: Do not raise prices by more than 1%.

Adopt the “Buy Now, Pay Later” Pricing Tweak

People are willing to purchase the product if they get the option to make payments later on.

There is the majority of customers are afraid to buy a product because of the immediate financial constraints attached to it. If you remove this constraint then they will be free to purchase the product right now and pay you later on.

This strategy is not for everyone. Think of the inventory you have currently and then adopt this strategy on products where the risk is less. The “Buy Now, Pay Later” strategy works pretty well to increase the trust of the customers which means you will get more loyal customers in the longer run.

Don’t Trust the HIPPO – Try Split Testing

Pricing is a process and there is no perfect price that exists for all of us. It is always better to opt for split testing when setting a price for a product instead of trusting the HIPPO (Highest Paid Person’s Opinion).