Did you know that price framing influences the customers on how they perceive the pricing of a product in marketing psychology?


In price framing definition, we’re talking about changing the context of a price presentation—without substantially changing the price itself—in order to encourage more purchases. 


Amazingly, price framing shouldn’t work at all. When making a choice whether or not to buy an item, in psychological pricing in marketing, you weigh in the pros and cons logically and select the outcome that, to the best of your knowledge, gives you the greatest value.


So, it shouldn’t matter at all how a price is presented to you. The price is the price, and you should make the same conclusion regardless of context. But, that’s not the case.


Using biases in marketing psychology


Psychologists discovered through controlled experiments that people use cognitive shortcuts called biases to help make choices. These shortcuts don’t always produce logical decisions.


It’s called behavioural economics where the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals affect what they perceive. It helps explain how marketing psychology decisions are made and the change in price formula that drive public choice.



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Here are three major principles that support behavioural economics:


1. People evaluate prices relative to a reference point


People evaluate purchases on relative terms. Looking for the value that’s reasonable. But many factors determine what is actually reasonable. 


Examples of price framing definition happen every day. For example, if you were looking to buy a standard quality bread maker, you’d go online and take a look at how much they are. You’d find that a standard bread maker costs around $80. You’d then probably take a look at the higher quality bread maker to see how much more it is than the standard product. If you’re going to spend $80, you’d probably want to look at what the best in range bread maker sells for, right? You take a look and find it’s $120 – $40 more than the standard version.


You compare and contrast the two machines.  Telling yourself you are not an expert maker and go with the $80 one.


Choosing from three options in marketing psychology


So, you think to yourself, “I think I’ll go to the shop and take a look at the machines” (seeing as this is a novel purchase and you don’t really know what good looks like). When you get to the store, you find that you now have 3 options to choose from: You can either spend $80, $120, or $475. Rationally speaking, adding an irrelevant option should not change your decision between the $80 and the $120 ones. The pros and cons did not change; quality of the bread makers remain the same, and you are making the same salary. You know that you are never going to spend $475 on a bread maker…


But, the thing is, now you feel more comfortable buying the $120 one. After all, you are not buying the most expensive alternative. You have found the middle ground, and you are probably happier, compared to someone who buys the cheaper version with only two options.


This is the most prominent part of the framing principle: i.e., that the attractiveness of a price will change depending on what’s presented with it. But, this is only one example of the effect one can have by introducing or removing other prices.


2. People evaluate price differences relative to the level of the initial price


The stronger a stimulus is, the more of a chance you have to make to it before we can perceive the change. The scientific name for this is the Weber-Fechner Law, is about two related hypotheses in the field of psychophysics. Both laws relate to human perception, more specifically the relationship between the actual change in a physical stimulus and the perceived change. This includes stimuli to all senses: vision, hearing, taste, touch, and smell.  This is especially important when studying price elasticity. The variation in the dollar amount that people are willing to pay for the same item.


This is why you have a hard time paying $5.00 for a Starbucks Sugar-coma Mocha, but you have an easier time coming down $5,000 on the asking price for the house you’re selling. 


3. Losses hurt more than gains give pleasure


This part of framing concerns is called the Endowment Effect. People tend to ascribe more value to that which they own. Therefore, people try to avoid losses more than achieve gains. People want to avoid late fees more than they care to take advantage of early-bird discounts, even if the value is the same.


Also called the Loss Aversion Theory, people feel loss twice as much as the pleasure as to gain. Customers love discounts and hate add-on charges. Even though the offering price may be the same, the route through which the price is offered affects the willingness of prospects to give payment. Discounts are perceived as a win for customers, while add-on charges are perceived as a loss.


When companies lower prices as a way of providing their customers with greater value, people think this is acceptable. However, when a company raises its prices to make an increase in their profits at the expense of their customers, people don’t like this very much – and rightly so. It’s a big and unpleasant loss. 


This type of loss is the stick-slip dimension of price framing. In other words, it is when the movement of prices changes influences customers’ price choices.




Price increase blamed on external factors on marketing psychology


Increasing prices is usually blamed on external factors, such as supplier costs, maintenance costs, and inflation. In an alternative approach, price rises can be positioned as being proportional, or even a relative discount, to an improvement in the underlying offering.


An example of this is the pricing in the marketing mix of Caterpillar on the basis of the technology used, product range & competition. Despite pricing much higher than other manufacturers, pricing has never been a problem for the company. Customers satisfied with the CAT (Caterpillar) products even priced higher. That is because the company is successful in delivering much higher quality for the price tagged. The positive perception created that the company adds 20% extra value to the products it prices premium. So, though the products priced higher, the price is lesser for the high-tech quality that Caterpillar delivers and the risk the customer avoids from buying from them.


They explain to the customers how their prices take away risk – i.e., risk of product failure, risk of downtime. They explain how their higher prices will help their customer make more money by avoiding risk. 


If a customer wants to explore a Cat retail store completely on their own, Cat wants them to be able to do just that.


A manufacturer makes sure that they are giving these customers options of how they want to view the machines. Be it on the website or showroom, you can find all the specs (and pricing) you need to know about those machines.




Customers seek value but also like to shed costs. In marketing psychology, customers perceive an offer as providing value, their frame of reference skewed towards maximising that value.  


If the offer perceived as a cost of doing business; they will seek to lower the cost and accept the minimum solution that performs its function. The specific message and approach made in marketing psychology to influence the frame of reference. For prospects towards a more positive attitude that is likely to encourage the buyer to purchase it.


The value-focused framing enables the customer to perceive the price as a small cost to pay receives the value offered.




By leading with a description of the value on offer then following through with the price, marketing psychology can focus on uncovering the challenges facing different prospects. Including a value-based description of their offerings and a clear explanation from sales on how each product can help customers overcome specific challenges.


Communicating the price first then following through with a description of the value encourages customers to focus on the price. Additionally, it also makes customers seek discounts throughout the discussion.


Value focused negotiation requires all price variances associated with value variances in any price concession. It must be accompanied by the removal of value from the offering. Value negotiation improves customer profitability, as challenges shifted to the party that can better manage them.


Discover what steps you can do to improve your pricing skills.


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