What is Price Illusions?

Price illusions occur when the cost of a product is broken down into a per-unit cost, creating a sense of cheaper value.

It's like selling a pie by the slice rather than as a whole; the cost per slice seems less costly compared to the whole pie. This tactic became popular with the rise of digital marketing, especially during the era of online subscriptions services and bulk-buying discounts.

Price illusions work by redirecting customer focus from the total cost to the value offered per unit. It harnesses the power of perception, playing on our natural tendency to simplify complexity. This tactic is crucial in conversion where the goal lies in persuading a potential buyer to take the desired action - be it signing up for a subscription or adding a product to their shopping cart.

Examples of Price Illusions

1. A software vendor sells annual subscriptions at $120/year, but advertises it as “just $10 per month.”
2. An online grocery store puts up a sale on a pack of 24 cookies for $12, emphasizing "you're paying just 50 cents per cookies!”
3. A fitness gym offers a yearly membership costing $600, but promotes it as "less than $2 per day for a healthier life!"
4. A mobile service provider advertises a two-year contract bundle costing $960 as "just $40/month for unlimited talks, texts, and data!"
5. An e-commerce site presents a bundle of 6 designer t-shirts for $150 as "each t-shirt for as low as $25 only!"

Marketing Tactics Similar to Price Illusions

1. Anchoring: Anchoring sets an initial price point ("anchor") which tends to influence subsequent pricing or negotiation - usually used during sales like "Original price: $1000, Now: $800!".
2. Decoy Pricing: It involves creating a tier of products where one option is specifically designed to make another option look more appealing. In a cinema, small popcorn maybe priced at $6, and the large one at $8, making the larger size look like a deal.
3. Charm Pricing: It refers to pricing products just below the rounded number to make it appear cheaper. For instance, $19.99 instead of $20.
4. Pay-What-You-Want: It's a pricing system where consumers pay any desired amount for a given commodity, sometimes including zero. Commonly conducted in street art or charitable events.
5. Bundling: Bundling means selling several products or services as a package, generally at a lower price than they would cost individually. For instance, buying a phone with a case and screen protector costs less than buying them separately.

Link to this page

If you share this content in your blog post or email newsletter, you can use the tool below to quickly copy and paste the link.