Psychological pricing is the practice of setting prices to appear subconsciously more appealing to a target market and to therefore positively advance the buying decision. This desired effect on demand is the reason behind establishing price points (like MAPprices, MSRP and so on). However, since there are different types of psychological pricing, it is essential to understand their differences and select the appropriate one for your brand.
Prestige pricing refers to setting prices higher than normal because lower prices will turn off the target market. This is therefore common for brands that are associated with luxury, high quality, high performance, exclusivity marketing triggers or some other type of unique value proposition (UVP) or brand position that carries a premium from which you can profit. Be sure to stress the UVP in the sales pitch, whether in packaging quality or words on the package.
Charm pricing is a popular pricing strategy used in retail. Since humans (used to reading from left to right) tend to focus more attention on the digits to the left, retailers often reduce prices like $1.00 to $0.99. $0.98 or 0.97. Although the difference is marginal, people generally consider it a more significant discount than a 1-cent increase to $1.01. In short, consumers perceive the small discount to be larger than it really is.
To test whether this can work for your brand, simply change your price accordingly and compare the market's response.
Needless to say, charm pricing has become so popular worldwide that the market expects a regular, non-luxury product when they see charm pricing. Consequently, avoid charm pricing for luxury products. Specifically, feel free to use whole numbers. In other words, rather than prices like $199, set the price to $200. Using charm pricing inappropriately like with luxury products could be detrimental to your brand.
Innumeracy refers to a pricing approach that takes advantage of the fact that many buyers are either unable or unwilling to understand some mathematical concepts involving numbers as they apply to daily life. This usually involves wording offers in ways that create a favorable illusion. Example(s)
Consumers respond more favorably to offers to get the 2nd item free over pay 50% off when the 2 offers are essentially the same.
When shopping for an item priced at $100, consumers easily feel special by the idea of getting not only 1 discount of 25% but an extra one of 20% 'just because the sales person ostensibly thought they were great'. However, the positive emotion deceives them, preventing them from realizing that, if the amount payable were calculated at once on a single summated discount of 45% (as b below), they would pay less ($55) than based on the discount being calculated in 2 parts. As illustrated below (in a), breaking apart the discount into 2 means that, when calculating the second second of the two discounts, that second discount will be calculated based on a price that is less than the original, ie less than the $100. Conversely, the summated total of the discount of 45% is calculated at once based on the higher original price of $100.
a) $100 x 0.75 x 0.20 = $60 VERSUS
b) $100 x 0.55 = #55
If your price can fall between $24 and $29, raise it to $29 without risk of consumers feeling ta significant difference.
Price Appearancerefers to the physical way in which your price is displayed. The appearance of prices can be adjusted to support either abovementioned charm pricing or prestige pricing.
Appearance of prestige pricing. High end retailers who have rounded up their prices (from $1xx to $200) recognize they are forcing upon their customers the pain of parting with more money than normal. For this reason, despite the fact they have clearly raised their prices, they try to make it appear as physically small and with as few characters as possible. In other words, they are trying to trick your mind into somehow thinking that the price is lower. For instance, a fancy clothing store may have prices written in small font and without the extra 0s at the end. Example(s):
The price will be printed with a small font as '200' and not $200.00. The $ sign and extra digits reinforce the price. This is further reinforced by the fact that consumers read all the syllables of prices in their minds and would therefore take longer to recite the longer numbers.
Appearance of charm pricing. Non luxury prices that end in .99 like 1.99 for instance may make the 0.99 as small as possible. Needless to say, charm pricing is also typically presented with signage that is loud and large with words like 'sale'.
1.99 (versus $1.99)
Final note regarding ethics
Beware as some consumers will find these practices deceptive while others will find them entirely acceptable. You will therefore need to consider your market very carefully.
Research shows that a consumer's emotional response influences him or her very powerfully, even to a greater extent than hard information (like features) in advertising and other forms of brand communication. A measure of an advertisement's 'likeability' is more predictive of its success in increasing sales. Evoking positive emotions are even more influential. This is why brand-name products are preferred over generic ones, despite their higher price. Research shows that consumers see brands as having personality characteristics, just as they do other people. There is no wonder why strong emotional representations of brands are so important.
Research in 2014 by the Institute of Neuroscience and Psychology suggests 4 key emotions being 1) happiness, 2) sadness, 3) fear (or surprise) and 4) anger (or disgust). This post illustrates how different brands align their branding or current message with one of these emotions.
Happiness
Research has shown that brands have successfully increased sharing and engagement by associating themselves with smiling, laughing customers, often connecting deeply with each other in friendship and positivity. In fact, evoking positive emotions was more successful in this regard than with negative emotions. Disney is possibly one of the few brands whose emotional ads can truthfully depict the product and real customer experience. It is inspiring to note however that, despite this fact, other brands successfully instill emotion into their branding with creativity.
Coca-Cola's 7-year 'Open Happiness' campaign suggests that the drink is happiness and that opening the bottle gives access to its contained happiness. Despite the glaringly apparent lack of nutrition in the drink, especially within the context of this modern age of concern for health and welbeing through diet (and consequent falling sales in fizzy drinks), Coca-Cola remains one of the most popular drinks, globally. Perhaps the reason is, at least in part, because of the fact that their advertising never even discusses the drink but instead focuses on happiness and overall very positive social interaction and the deeply personal emotions they evoke. Coca-Cola does not even waste time trying to convince anyone of the drink's innate goodness.
Although Coca Cola changed its tagline from 'Open Happiness' to 'Taste the Feeling', it maintained the message of happiness. This change was in response to the brand's challenge against its lack of nutrition. Video ads show deep emotional connection as people drink Coca Cola. This campaign's underlying message simply suggests that Coca Cola heightens the enjoyment of pleasurable moments. As usual, they used emotionally charged imagery of relationships amidst the strong signature red accents to reinforce the positive association in the minds of consumers. As to be expected, they even tentpoled this campaign for Christmas also. (The ads momentarily show the 'zero' calories bottle)
Android's 'Friends Furever' 2015 advertisement was shared so many millions of times that it was the most shared for that year and, by then, of all time. The video shows clips of unexpected inter-species animal friendships, a viral bait. Powerful animals whose relative size would have made them otherwise dangerous to their friends play with obvious affection and due tenderness. There are many surprising duos from huge elephant frolicking with a puppy, an orangutan using its large limbs to lightly embrace a canine friend amidst a loving gaze and so on. Maybe this ad was even more successful because of its video format because, apart from evoking positive emotions, it certainly put me at the edge of my seat a little with some trepidation over the larger animal's ability to easily or accidentally hurt his dwarfed companion. If this was part of the plan, the creators successfully stirred emotions from negative to positive. The song 'Oo De Lally' from Disney's Robin Hood, a term whose meaning is the gleeful 'yay' or 'yippee', is reminiscent of youth and ideals of happy friendship. The Robin Hood story was one of desire for different people (from Norman and Savon) to live together in peace. I am not sufficiently techie to understand how the 'friendship' theme can relate with how Android's operating system is designed or works ... you know like how at least, to the end of the Kleenex ad, the link was made by the need to wipe away happy tears. This advertisement has however made me wonder whether this video is at least partially responsible for the recently exploding interest in connecting more profoundly with pets and caring for the planet.
Is the psychology behind this advertisement's success based on the idealistic desire, albeit possibly superficial, for friendship despite differences? Shakira and Activia's World Cup 'Dare / La La La' ad was the most shared for 2014. It is a mix of many different peoples and cultural influences, from African drums. Its appeal was likely also due to how, along with the concepts of diversity, both influential music and sports are to newer generations. The ad checked several boxes.
Disney is possibly one of the few brands whose emotional ads are a direct reflection of the brand and customer experience. They certainly take full advantage as seem in their live advertisement by creating a fun experience for shoppers at a mall.
SADNESS
Advertisements that evoke sadness are those that deal with stories of adversities and challenge. These stories stir empathy for the struggles of the protagonist. Advertisers use this story to encourage customers to identify with the story's protagonist. In the end, the advertising brand offers a solution to the challenge.
Kleenex produces tissue. Despite the fact that tissue paper is an arguably most boring product, the brand remains strong in consumers' minds. Emotional advertising that uses an emotional story involving a beloved pet, the zeitgeist of emotional video marketing, prevents this brand from disappearing into obscurity. The 'Unlikely Friends' advertisement was one of the most viral ads in 2015, the year of its publication. It tells a rescue and care story of a crippled dog that begins on a sad note then end with happy tears. It is only to the very end, when you might not have realized or forgotten the story was an ad when for a short moment, a protagonist sniffles and wipes away tears of happiness with a Kleenex. At that all-important emotional peak, the brandname appears with the tagline 'someone needs one' The wheel-chair bound adoptive human and wheel-bound dog walk off into the sunset, ie after a powerful message of inspiration was given that there are no restrictions.
MetLife Hong Kong's advertisement 'My Dad is a Liar' is a tear jerker. As a little girl and her father walk on the way to her school, he reads her poem. She speaks of how wonderful he is; that he is handsome, smart, her superman and so on. As he reads, the story illustrates his funny antics infront of her to give her those impressions. However, he pauses in his gait when he reads the line about him being "a liar". As the poem continues, the viewer sees ways in which he sacrifices for her, pretending to have a job, money, to not feel hungry (so that she can eat) and so on. As the poem advances, viewers see images of the father's daily hustle with menial , some times, strenuous jobs. It shows that, despite being tired, he lies about not being tired and runs with her on his shoulders to amuse her. The turning point is the end when she acknowledges that he lies to give her a good future, at which point the father and daughter embrace. The powerful message on the screen appears that 'a child's future is worth the sacrifice' and then the advertisement appears. "We all have dreams for out children. Share yours with us and it can become reality. [and their contact details]" Not surprisingly, parents doing reaction YouTube videos were often left in tears.
Brands often re-use the same story repeatedly, with different actors and scenarios. For instance, every year, Proctor & Gamble (P&G) releases a 'thank you mom' advertisement. For the Olympics, mothers are featured helping their children overcome challenges when they started their sport of choice. The stories end with the mothers in the audience of the Olympics seeing their children perform well.
FEAR
Fear appeal is used to motivate customers to consider the risk of negative consequences for not buying into the product or message being sold. It is very common in public service advertisements that attempt to discourage behaviors that are associated with negative outcomes. However, evoking fear in marketing to your consumers has ethical issues that you should seriously consider beforehand. Fear & Disgust. Being at risk of extinction, the panda has become a symbol for animal conservation and is aptly used in the World Wildlife Fund (WWF) logo. Everything about their advertisement inspires deep fear and discomfort on multiple levels. Notice the somber background and heavy font. The unusual use of repetition of one word, 'change' in a single sentence reinforces the ominous message, along with the hideous image of a man mutating into a hybrid species. The hideous looking species comprises nearly 50% of the frame. The mouth, although from another species, has a sad downward slant, the harsh lighting that comes from 11 o' clock gives a sense that the being is facing some solemn reckoning of sorts from a higher power. Looking at this hybrid species evoke such repulsion as may occur when humans view a dead human being which relates mostly to one's personal struggle with mortality.
13Quit, a quit smoking helpline in Queensland, Australia showed an advertisement of a sad and fearsome story of a child losing his mother in a rush hour crowd at a train station. As parents' emotions are stirred towards sadness over the child's obvious anguish, the narrator stirs fear by asking if a child is so troubled over losing a parent for a minute, how much more will your child will be troubled by such a loss over a lifetime. Although not expressly discussed, the ad highlights the loss of happiness simply by virtue of its existence in huge contrast with all the other feelgood messages.
The anti-meth advertisement below features an image that is so repulsive that it could possibly evoke sufficient fear alone. However, the sarcastic tone of its message to the teenage girl audience is also provocative. Specifically, it reminds girls of what they could lose, ie their beauty, something very important to the target market.
Advertisers also use symbolic imagery to convey more abstract concepts like brain damage as a result of drug use. Example. Ccacanada does this by depicting the brain as a series of wires. It shows that, as someone consumes more drugs, wires are cut until the brain is forever short-circuited.
Anger Anger appeal advertising often stirs emotion around an injustice, usually of a social kind. The brand presents itself as offering a solution to correct the injustice. Always sells female sanitary napkins. However, they have taken on the cause of sexism that can hurt the self esteem of adolescent girls. Their advertisementfocuses on the insult 'like a girl' and attempt to bring awareness to the fact that the term is insultive. Normally Happy Brands in Sad Times? If your brand is to be like a friend to your customers, you will appreciate how unempathetic and tone deaf it will be to flaunt happiness as per usual during a crisis. Coca Cola during the Covid19 pandemic. As the corona virus pandemic advanced, Coca Cola remained true to its bright color but with a still positive message; specifically, one of encouragement and thanks to those who are helping others. This is genius because they are still remaining true to their brand as it relates to positivity, togetherness and relationships.
We are experiencing something difficult right now. But we know that, among us, we will overcome this situation. Endless thanks to [#Istayathome] and those sacrificing everything to help others in this situation. Seeing so many people united just fills us up.
Coca Cola after the George Floyd murder and consequent resurgence of the Black Lives Matter (BLM) campaign. Quite unlike the Covid19 scenario which did not involve needless violence by humans, Coca Cola made a significant departure from key aspects of its 'happy' mood (like using a black rather than red background). This departure was evident even visually, an element I can not recall ever having been paused. The message's tone offers promise to take a moment for reflection on how to do better. It promises to do better than the common inauthentic practice of using PR to profit from any situation, even sad ones. Time will tell its measure of authenticity. However, the effort is commendable regardless. Ultimately, they are not portraying the usual 'happy' mood, they are essentially promising to bring just that, but also to black lives. After all, their brand is about relationships and connection.
Final Thoughts
While a single emotional cue may be more suitable to a brand, brands may use combination of these emotional cues and entirely different ones for different purposes. For instance, a 'happy' brand may encourage customers to join its free shipping subscription program by instilling subtle amounts of fear over the spread Covid19 pandemic. As seen above, 'happy' brands can be solemn as well, ie while remaining true to their brand. After all, don't happy friends have moments of profound contemplation and sadness. It would appear tone deaf to be otherwise in solemn circumstances.
Degree of departing from the usual mood of the brand is a key consideration. For instance, if a happy brand uses fear-based advertising, it should mostly likely do so to a much less dramatic extent than brands with more solemn moods, like the WWF (above). Marketing executives have lost their jobs over material that was perceived to be tone deaf or otherwise insensitive.
As should have become apparent, marketers should use every possible avenue, symbolic and otherwise to overcommunicate. Notice how marketers do not miss opportunities for infusing their message into the minutest details, like Coca Cola colors in a model's tassel earrings and nail polish. When brands wanted to portray a happy mood, advertisements mostly used bright colors while their negative counterparts were all dark, drab and or monochrome.
CONTENT RELATED TO EMOTIONAL BRANDING / EMOTIONAL ADVERTISING
Another form of emotional branding is the brand lifestyle strategy that can be used to emotionally connect with consumes.
With which emotion(s) can your brand or current marketing objectives best relate? Branding 101.
“Special” and “Limited” editions promise new and previously unseen variations in the regular edition (or regular product line). They are characterized by being available for a short time and/or in limited numbers and featuring the highest quality production that demand a premium price.
Limited edition marketing refers to the practice of creating an air of uniqueness and prestige around goods or services. When done well, it is aligned with key marketing strategies that include brand awareness.
Key interrelated characteristics of any limited edition marketing initiative are scarcity, exclusivity and urgency (along with triggering the fear of missing out / FOMO). These characteristics can be applied in different ways within the marketing mix whether; product, pricing, distribution or promotion.
Scarcity marketing is a psychological technique based on motivating consumers to buy things that are difficult to obtain. Scarcity triggers anxiety that prompts consumers to act more quickly than otherwise. Exclusivity marketing is another psychological technique based on motivating consumers to buy things that others do not or can not easily have. The product should be able to signal to the world that they (the buying consumers) are one of a select few. Urgency marketing motivates consumers to act quickly. It is often done in conjunction with scarcity marketing to engender the fear of missing out if others get the product before they can. Ultimately, these techniques add perceived value to the product, increase demand and encourage consumers to make purchase decisions based on instinct rather than logic. Various research studies show that these techniques all increase sales to a significant extent.
Example: Scarcity and exclusivity through high prices for membership of a group with special privileges. The management of people with highly priced first class airline tickets is a routine form of scarcity and exclusivity marketing. It is not by accident that persons with boarding passes labelled 'class 1' are called to board first and settle in before other economy passengers are directed to walk through the fancy first class lounge. Sometimes, the first class passengers are already served pre-flight some finger snacks in luxury dishes (a privilege other passengers never receive). This has become common practice even though aircraft can be boarded more efficiently by simultaneously directing economy passengers through the rear door. Economy passengers are reminded again when they must wait for first class passengers to leave the aircraft after which they must walk through the empty, still untidy seats. It is noteworthy that these practices are designed with human psychology in mind. They engender a sense of exclusivity and being special among the first class passengers but more importantly, they engender jealousy and aspiration among the economy passengers. This practice has clearly proven useful for airlines who have done their analysis teams because they continue these practices at the high cost risk associated with overstaying their allotted parking time at boarding gates. Needless to say, the ostentatious opulence of the entrance to members-only first class lounges in otherwise drab airports also stresses the principle of exclusivity and special membership.
Example: Coca Cola's 'Share a Coke' multinational marketing campaign applied scarcity and exclusivity in the product. The campaign removed the traditional Coke logo, replacing "Coca-Cola" from one side of a bottle with the phrase "Share a Coke with" followed by a person's name or relationship like 'Mom', 'Friend', 'better half' and so on. This campaign was hugely successful for several reasons. It was highly personalized. It encouraged customers to ess entially self recruit themselves as brand evangelists or influencers for the brand. Rather than promoting the drink, they used emotional marketing, ie selling the idea of sharing happiness and therefore created a positive emotional association with the brand. See thedetails of Australia's 'Share a Coke' campaignbelow.
Example. Scarcity in supply chain along with high demand. When visiting restaurant strips, tourists rarely know which restaurant is good. Consequently, they often rely on longer waiting lines as an indicator of the better restaurants. They do not mind sacrificing their limited time in their choice destination for the promise of a superior culinary experience. The same principle applies to waiting and pre-order lists for new product launches, especially if coupled with positive consumer reviews.
Example: Kylie Cosmetics case study regarding the skillful use of tentpole and scarcity marketing. Tentpole marketing of products that trend with seasons (Christmas, etc) is commonly enhanced by also using scarcity marketing.
Packaging as a form of scarcity in the extended product.Special packaging has proven particularly successful in generating hype for limited editions, even though packaging is usually only an extrinsic part of the 'extended product'. The take away is that packaging can draw from buyer motivation factors that are unrelated to the product like pop culture, art and so on. Consequently, it provides opportunities for penetrating new markets and extending market share.
Example. Pepsi cans sold out because of a special edition Michael Jackson can. The can featured an image of the celebrity dancing one of his signature moves. Not surprisingly, it attracted not only young people who typically consume fizzy drinks but even an older generation that had grown up listening to Jackson's music. Using a cultural icon even captured the attention of persons who are not regular fizzy drink consumers but who wanted the can as a collectible. The genius of this initiative would have been multiplied if Pepsi followed up with a variation of their drink that could keep the attention of the non-fizzy drink consumers.
BEWARE: True vs false limited editions
Some consumers are weary of false limited editions because companies often offer the same products otherwise, thereby undermining the exclusivity that many consumers desire. For this reason, marketers ought to consider their tactics very closely. For instance, rather than calling a frequent tentpole-related release a 'limited edition', it may appear more truthful to call it a 'Christmas edition'.
Example: Starbucks' yearly a special edition of Christmas packaging features bright red holiday cups, sometimes with snowflakes, snowmen and reindeer that evoke warm memories and signal the start of the Christmas season. The cups even result in the Starbucks brand trending on social media when latte lovers go online to post images of their special cups using the hashtag #starbucksredcup.
Be mindful of the cultural sensitivities of the consuming public. For instance, after much controversy over the non-Christian approach like the exclusion of the words 'Merry Christmas', Starbucks embraced this simple red cup in 2015. Below, is the 2019 edition.
Other general examples of these techniques.
Provide discount codes that will expire within a given time period.
Hold sales that will occur only on a particular date like Black Friday.
Display countdown timers.
Display the potential price increase.
Create the illusion of low supply.
Show social proof by allowing shoppers to know that their peers are also viewing or already buying the same or similar items. This triggers FOMO (the fear of losing out).
Use urgency trigger words that tap into the pyschological principle of loss aversion. Research shows that people are more powerfully motivated to avoid losses than to acquire gains. They include don't delay, don't miss out, offer expires, ends soon, save today, buy now, one day only, last chance.
Display the expiration of carts to minimize or prevent cart abandonment (through distraction or forgetfulness). Have a system to follow up on abandoned carts.
Flash sales, ie sales of goods or services at greatly reduced prices and lasting for very short time periods. This is often used to get rid of surplus stock or to quickly generate revenue.
Display when products are stocked out. If done to a limited extent (that will not frustrate customers), this can encourage customers to find suitable alternatives. Ideally ensure that you never stock out of all products that relate to specific target markets.
When selling services, including professional ones, scarcity is often communicated to clients with wording that sounds like this. "We qualify / vet our clients carefully because we accept a limited number of cases that we are certain we can delivery to extremely well." This sends the message that your services are in demand and that they should have a fear of missing out.
Psychological pricing. Urgency, scarcity and exclusivity are one way of psychological pricing, especially prestige pricing. Read about other types of psychology pricing, some of which may be combined with prestige pricing.
Scarcity marketing is commonly used with tentpole marketing for trending products.
Risk management communicationuses scarcity and urgency in a slightly different way. Specifically, it establishes the thing of value that customers already have. However, it encourages customers to take action in order to avoid or mitigate the risk of losing that thing of value.
