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Price-point Pricing

 

DisciplinesMarketing > Pricing > Price-point Pricing

Description | Example | Discussion | See also

 

Description

Determine a set of price barriers, across which customers change how they buy, then set your price in order to achieve the customer actions you seek.

The most typical price point is the 'bargain' point, where any product priced below this will sell significantly more as customers will consider it to be remarkably good value. Such price points typically end in zero and may be in the tens or hundreds of currency units.

There may also be 'luxury' price points, above which customers will assume the product is high quality or exclusive. Again this typically ends with a zero (or several zeros), for example a thousand currency units.

Example

An electronics store sells printers below 100.00, as they find far more sell in this sub-hundred range (even 99.99).

A fashion clothier has a minimum price in their retail outlet of 500.00. This keeps out 'undesirables' as it sends a message that only rich people can shop here.

Discussion

Price points are often psychological in nature, which is why they often end in zeros. Rounded numbers such as 20 or 400 seem more of a mental barrier than other numbers such as 19 or 345. Odd number in particular have a greater psychological 'instability'.

Price points are also affected by market norms. If most products are between 200 and 300, then products priced less than 200 will seem particularly cheap. Barriers can also appear within the price range, for example if products cost between 150 and 250, then those below 200 may well seem cheaper and those above 200 seem more expensive. 

See also

Bounded Pricing

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