What Is Psychological Pricing And What Is A Price Lining Strategy?

Psychological Pricing is actually a pricing strategy that makes consumers think the price of a product is lower than what it actually is.  For example Wal Mart, a store that uses EveryDay Low Price and Odd-Even Pricing which are two Psychological Pricing strategies that make the product look less expensive or cheaper than what it actually is.  An example of Odd-Even Pricing is a product like a car stereo being sold at 89.99, the odd numbers make the product look cheaper than what it really is because the product is set to be sold by the fractions of a cent.  So the price of the product would actually be 89.999 which rounds up to 90.00.

Pricing is one of the 4 P's of the marketing mix, having tremendous importance in terms of developing the marketing campaign of the product. It is one of the most important determinants on which customers usually base their buying decisions. However depending upon the nature of the good or the service, customers prioritize the factors that shape up their buying behavior – in other words, price is not always the most important determinant in shaping the buying behavior of the customers.

As far as psychological pricing goes, this is normally used in the case of high-priced luxury goods or more precisely speciality products. This involves charging a high price for the brand so as to project an exclusive and 'high-class' image of the brand in front of the consumers. It works with the consumers and is quite an effective pricing strategy. As for price lining strategy, it takes place when a company offers variations in the prices of the same product in accordance with the high-quality product to the not-so-high-quality product.