Psychological pricing: What is Charm Pricing?

Ashish Kumar

7 min read

Boost revenue and conversions with Charm Pricing: Discover the impact of perceptions and evaluations on purchase decisions. Charm pricing is a strategy that claims the way you price a product will affect how well it sells. This technique is used by companies like Apple and Uniqlo to improve sales.

Charm pricing is also known as psychological pricing. The basic concept behind charm pricing is to price products with numbers that are somewhat unusual or charming, such as prices ending in 7, 8, or 9. This type of pricing is often used in retail settings, as well as in online sales.

Basically, Psychological pricing is a technique that aims to make a product or service more appealing to consumers. 

For instance, instead of pricing an item at $10, a business could opt to price it at $9.99 or $9.95. This slight variation in price may appear inconsequential, but it can wield a noteworthy effect on how consumers perceive and behave when making a purchase. Hence, charm pricing emerges as a potent tool that businesses can employ to sway consumer decision-making.

One reason why a charm pricing strategy can be effective is that it can make products or services appear less expensive than their actual price. For example, pricing a product at $19.99 may make it seem more affordable than a product priced at $20.00, even though the difference is only one cent. This type of psychological pricing can also create a perception of higher quality, as consumers may associate higher prices with better quality products or services.

Here is a list of examples of how brands have used charm pricing.

Perceptions & Evaluations

Research has shown a consumers' perceptions and evaluations are disproportionately influenced by the left-most digit of the product price. The left-digit effect and the magnitude of price have proven to have a positive impact on purchase decisions for a very long time.

Apple uses charm pricing for iPhones
Apple uses charm pricing for iPhones

Studies have shown that consumers perceive just-below prices as being lower than they actually are. For the iPhone above, Apple prices it at $999, and most shoppers psychologically round the price down to $900 rather than rounding up to $1000. Perceiving the iPhone to be almost 100 dollars cheaper!

These just-below prices (like .99, .95,.97) are believed to drive greater demand and work almost like a charm on buyers. Hence, the name Charm Pricing.

At Konigle we get asked a lot, does Charm Pricing work? Over 76% of stores that use Konigle, use the Charm Pricing technique. We analyzed over 1.5 million online stores and found stores using some form of charm pricing technique end up making 4% higher revenue than those without. Yes, there could be multiple reasons for these stores doing better, but we find improved conversions and better brand recall as two major outcomes of using charm pricing techniques. uses the 0.98 rounding technique for a promotion uses the 0.98 rounding technique for a promotion 

Konigle's charm pricing research focuses on analyzing 1.5 million stores. According to Konigle's research on charm pricing, we found that...

  1. Stores using charm pricing have higher revenue.
  2. Stores using charm pricing show improved conversions.
  3. Stores using charm pricing have a better brand recall, think 99-cent Apple iTunes.
  4. Stores find it cumbersome to implement, especially for products on discount.
  5. Stores can implement charm pricing on their store using Konigle in under 3 minutes.

This video explains what charm pricing is and how you can implement the charm pricing strategy on your online store in under 3 minutes using Konigle.

Konigle's Charm Pricing Strategy tool

Do you know about prestige pricing? How does it work?

Advantages of charm pricing include:

  1. Perception of lower price: By using charm pricing, consumers might feel that the price is a bit lower than it actually is because of the positive psychological effect of seeing a price just below a whole number.
  2. Increased sales: Offering a more affordable price can actually boost sales, as it tends to make consumers more likely to make a purchase.
  3. Enhanced product value: By using charm pricing, we can create a perception of value for money, which will make our customers feel that they are getting an excellent deal.

However, charm pricing also has its disadvantages:

  1. Potential trust concerns: Some consumers might perceive charm pricing as misleading or manipulative, which has the potential to undermine trust in the brand or product.
  2. Limited impact: Charm pricing may not always have the desired effect in every market or industry, and its effectiveness can vary depending on the target audience.
  3. Perceived low quality: Sometimes, using charm pricing may give the impression of low quality or cheapness, which could potentially have a negative impact on the brand image.


Ashish Kumar

Co-founder at Konigle and an accomplished cook.

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