Is Psychological Pricing an Effective Strategy?

Price has a psychological value. Buyers will buy a high priced product because they believe that the high price is a good indicator of value. Their perception is not reality based, it is psychologically based therefore buyer behavior is affected by more than the product and price tangibles.

Interestingly, as buyers do more investigation into the product's attributes or the business promotes the product's characteristics more effectively, that product knowledge ('familiarity breeds contempt') enables buyers to make a more rational, versus psychological, buying decision and for buyers, price moves down the value scale.

Strategy

One use of psychological pricing is in price-ending numbers. Buyers believe that prices ending in uneven, rather than even numbers, (such as, .99, 9,999, etc.) are a better deal or a better price than even numbers (e.g. or 0,000). If the products to be priced are to be in a price 'band' (such as on-line auctions, or cars or other sales listings), if the listing price is in the odd range, say 9,000, it will appear in a lower price band than the 0,000 listing and will be viewed as better value. The challenge with this strategy is that products ending in an odd number are also often perceived as being lower in value. Ensure that you chose the right price and the right strategy for your specific product or service.

Is Psychological Pricing an Effective Strategy?

Another use of psychological pricing is reference price. Reference pricing is when buyers have a psychological response to the price that mirrors the way they view a price's relationship to a specific product. A business could capitalize on reference pricing and position their product amongst high value or luxury items to imply that its product belongs in the same category. Be careful with that positioning strategy, it can backfire if buyers feel that your product doesn't really belong in that category.

For psychological pricing to be an effective price strategy, the product needs to have some characteristics that would appeal to an ego-sensitive buyer. For example, luxury goods are attractive to ego-sensitive buyers. Premium recreational goods, such as boats, are attractive to ego-sensitive buyers. Your strategic planning model must ensure that the pricing strategy selected for your product or service is a best-fit price.

Make sure that your price strategy fits your product and your market by testing the price before releasing that price to your whole target market. Also consider the impact that the other elements of marketing mix have on your price: is the product the right fit for a psychological price strategy, is the promotional program in-step with the price strategy, and is place or the distribution channel in balance with the price (i.e. shipping of the product should not cost more than the product itself)?

Is Psychological Pricing an Effective Strategy?

For more information on pricing strategies, visit http://www.more-for-small-business.com/pricing-strategy.html and for more information on small business strategies and advice, visit http://www.more-for-small-business.com/
Kris Bovay is the owner of Voice Marketing Inc, a business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses.
Copyright 2008 Voice Marketing Inc.

Best Investment Strategy for 2013 - Simplified

Here we lay out the average person's best investment strategy for 2013, keeping both the investment strategy and investment options simple. For most folks the best investment options are mutual funds. So, here we highlight the best funds and funds to be wary of for 2013 and beyond.

Due to the risk of interest rates rising in 2013 or 2014 and the heavy investment losses that this could cause, money market funds are your best investment strategy and best funds in the safety department. They earn interest and pay dividends that increase when rates go up, and their share price does not fluctuate in value (pegged at ). Every major fund family offers these funds, and your best strategy is to go with tax-free funds ONLY if you are in a higher tax bracket. Otherwise, the best funds here for you are the traditional, taxable money market variety.

Strategy

Bond funds are the next investment options to consider in putting together your best investment strategy, and this is where you must be careful. Bond funds should be a part of virtually everyone's investment portfolio; and have been good solid performers year after year for a long time (basically, for 30 years). However, the best funds in the bond arena of yesterday could be the worst funds in 2013 and beyond. Bond funds are relatively safe and are some of the best investment options for average investors ONLY when interest rates are high and/or are falling. Since interest rates fell to record lows in the summer of 2012, there is not much room for them to fall much further.

Best Investment Strategy for 2013 - Simplified

Your best investment strategy in terms of bond funds: go with short or intermediate term bond funds. Don't reach for the higher dividends offered by long-term bond funds, because if interest rates head north significantly, your fund's value will head south big time. That's one of the worst investment options for the average investor. Don't go with the highest quality bond funds; and don't go with tax-free funds unless you are in a higher tax bracket. Both of these investment options will only serve to lower your dividend income in this period of record low interest rates.

The average person also needs to include stock (equity) funds as a part of their investment strategy for 2013. The best funds in the diversified equity funds category will be those that hold large-cap, high quality stocks that pay higher than average dividends. These are your best investment options because they offer: diversification, good dividend income, and less volatility (price fluctuation risk).

There are times when the best investment strategy is aggressive in nature; but with financial problems in Europe, and a floundering economy in the USA this is not one of them. Keep all 3 mutual fund types in your investment portfolio to keep your portfolio balanced. But cut your risk in both your bond funds and stock funds by going with the mutual fund investment options suggested above.

It's tough to find good interest income and dividend income these days without taking significant risk in long-term bond funds. To increase your dividend income I suggest you also consider specialty stock funds that specialize in a specific industry. Real estate equity funds could be one of the best investment options to increase your dividend income, and could offer good returns (growth) as the real estate industry gains strength.

When considering your best investment strategy for 2013 and beyond you've got to take today's HIGHLY UNUSUAL interest rate environment into consideration. Our Federal Reserve has openly stated that they INTEND to hold rates down or lower them even further through 2013 and possibly 2014. They want to stimulate our lackluster economy. Meanwhile, the USA goes further and further into debt. National debt: TRILLION. Even at today's ridiculously low interest rates, the economy is not responding.

Maybe the Federal Reserve will successfully take interest rates even lower; and maybe this will stimulate our economy. In putting together your best investment strategy for 2013 or 2014, I wouldn't count on it. Sooner or later the party will be over for people who assume that their longer-term bond funds will continue to be one of the best investment options out there.

Your best investment strategy in times of high uncertainty should focus on both caution and balance. Here I have offered my opinions on the best funds, best investment options for the average investor for 2013 and beyond.

Best Investment Strategy for 2013 - Simplified

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim's 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.