In 2007, Coulter and Coulter showed two advertisements to two random groups of customers. Each advertised £10 discounts on flights to Turkey. One listed the tickets at £188. The other showed a higher price: £233.
Customers found that the cheaper tickets felt like a worse value. Why? Researchers found that people more easily differentiate smaller numbers. The difference between 4 and 3 seems more salient than 9 and 8. So, customers were more likely to buy when the prices ended in smaller numbers £244 to £233), compared to those ending in higher digits (£199 to £188).
The takeaway is fairly simple. Next time you run a discount, make the sale price less than five. That’s just one piece of pricing advice that we’ve discussed on my podcast Nudge, the U.K.’s number one marketing podcast. Here are four more psychology-backed tips for pricing your products.
Table of Contents
Break down your price.
Show the price difference.
Be transparent with your costs.
Make the difference visible.
Break down your price.
Check out the two ads for a budget lunch from Huel. One shows the total cost of 21 meals (£78.96). The other breaks down the price per lunch ($3.76). Researchers found that breaking down the price per unit performed better with customers. Showing a lower price led shoppers to perceive that they were getting a better deal.
Richard Shotton and Michael Aaron Flicker tested ads very similar to this for their fantastic book Hacking the Human Mind.
In a study, 282 shoppers were divided into groups. Half were shown Sierra Nevada Pale Ale priced at $18.99 for 12 bottles. The other group was told the price per unit — $1.58 per bottle. Among those shown the per-bottle price, 28.6% said it was good or very good value (more than double the 13.7% who only saw the total price).
Framing the cost per unit made the purchase feel more reasonable and affordable.
Show the price difference.
Companies looking to upsell their audience need to pick the right framing. Take this 2019 experiment from David Hardisty at the University of British Columbia. Hardisty tested different pricing packages for New York Times subscriptions.
Group A saw two plans:
A “Digital Access” subscription for $9.99/month.
An “All-Access” subscription that included web access, the app, print newspapers, podcasts, and the crossword for $16.99/month.
Group B saw the same products described in a different way. The first plan showed a “Web + App” subscription for $9.99/month. The second plan, labeled “+ All the Extras,” was available for an additional $7/month.
Same total price. Different framing. But, Group B chose the premium plan two times as often. Why? Because $7 extra feels easier to justify than $17 total.
Want people to go premium? Don’t show them the full price. Use differential price framing and just tell them the surcharge.
Be transparent with your costs.
I went viral on LinkedIn for sharing this image about chicken soup. One showed a bowl priced at $7.99. The second ad showed a breakdown of all the ingredients, how much they cost, and the profit margin before the final price. Which sign would be better for sales? The post attracted a lot of attention because the results were surprising.
My post was based on a 2020 study from Harvard designed to test the effects of showing a product’s cost. The initial experiment ran in a Harvard canteen, where researchers tracked actual purchases after students viewed the comparisons.
When the costs were made visible, soup sales increased by 21%.
The takeaway: Price transparency wins. Customers are more willing to pay when they know what goes into making a product.
Make the difference visible.
Imagine handing someone the equivalent of $1 and offering them a choice between two packs of gum. Same flavour. Same brand. Same price.
What happens? Decision paralysis.
In one South Korean study, participants in South Korea were given ₩1,000 and asked to choose between two identical packs of gum, each priced at ₩630. Only 46% made a purchase. More than half walked away.
Then, the researchers made one small change. They adjusted the prices slightly. One pack cost ₩620. The other brand was priced at ₩640. This time, 77% made a purchase. A tiny 20-won difference led to a 31-point jump in purchases.
Why does that happen?
When two options feel the same, people struggle to decide. So if you’re offering similar choices, find differentiating factors. Make one a bit cheaper, a bit quicker, or a bit more appealing. That tiny tweak can make a big difference.
Small nudges can work.
None of the tactics above changed the products themselves. Each approach simply changed how the price was presented. Those small shifts in framing dramatically changed what people choose. So remember: Small shifts can help products stand out, make deals feel more salient, and entice shoppers to buy.
Start testing and see what works for you.
