Psychological Pricing

Pricing psychology principles to boost sales, build customer trust and enhance perceived value.

An abridged version of this was published in November 2024 in the KBB Review. Click here to read.

When preparing and presenting quotes to customers, have you ever considered how the psychology behind your pricing could be the key to closing more sales?

The way you present your prices can significantly influence whether a customer views their investment as a wise choice or a daunting expense.

A recent survey I conducted with the market research agency Zebra Square highlighted both the importance, and the challenges customers face in understanding kitchen pricing. Kitchens are a significant investment, involving numerous decisions and trade-offs, which makes it difficult to compare prices on a like-for-like basis. It’s no surprise that customers often spend a considerable amount of time shopping around!

As consumers, we need context to evaluate 'value for money.' Big purchase decisions aren't made entirely rationally; instead, we rely on emotions and mental shortcuts. I've been reading about this recently, and a few concepts stood out as particularly relevant to this industry—ones that could lead to higher conversions and increased margins.

Use ‘Price Anchoring’ by presenting more than one quote

Price anchoring occurs when customers are exposed to an initial price that sets a reference point (or anchor), influencing their perception of subsequent prices. For example, if a high-priced option is presented first, other prices may seem more reasonable by comparison.

The application of this is well suited to kitchens. You could try this by recreating the same design as closely as possible but with 3 tiers of specification, broken down by door choice, cabinetry, appliances & worktops. The middle option, framed by an entry level and more luxurious option, will often appear to be the most balanced and reasonable choice.

By presenting options this way, you make it easier for the customer to make decisions. We naturally expect higher-quality products to cost more, and by transparently showing the quality trade-offs against price, you build trust and confidence in how the budget is being allocated. This approach could increase the likelihood of conversion perhaps even upselling to higher-margin options.

Deploy ‘charm pricing’

Most of us know that prices ending in 9 (e.g. £9,999 instead of £10,000) are perceived as being significantly lower, even though the difference is minimal, but did you know that the visual length of the price also impacts our perception?

£15,878.99 would be perceived higher than £15879. By removing the pence and commas, the price appears smaller, which research shows is subconsciously associated with being lower.

Highlight value, even when it’s not charged for

Are you also offering free value in areas where customers would be willing to pay in a different context?

For example, if you provide a free design service while other showrooms charge a design fee, are you making sure to highlight that? Some showrooms offer a free design but limit the number of revisions before charging a fee. This approach not only protects your time but also underscores the value of your expertise—whether or not you ever actually charge for it.

Similarly, if you don’t charge separately for delivery, are you emphasising the value of this service? For instance, DIY kitchens charge from £99 for delivery. By highlighting the value of these non-chargeable services, you are adding to the overall perceived value of the deal.

Be smart when applying discounts

Most retailers I work with do apply some level of discount to a quote, sometimes applied somewhat arbitrarily to hit a certain total price. However, there are ways to make the same discount feel more valuable without changing the actual numbers.

One way is by displaying the discounted price alongside the original price, with the original crossed out. This approach makes the discount more visible and impactful than simply showing a lower net price.

Additionally, instead of applying a discount across the total price, consider weighting it on specific products. This can be particularly effective if there’s an item the customer is especially price-sensitive about.

For example, if the customer has chosen a more expensive paint-to-order colour or a bespoke cabinet solution, you could clearly present this as a complimentary upgrade. Personalisation carries high perceived value, but this can easily get lost and overlooked in a quote.

Appliances are already lower margin items before being discounted, but they do have clear and comparable value in the marketplace. Offering a ‘bundle’ discount or a free upgrade to a more premium brand may be perceived more favourably than a flat percentage, or than deducting the same value from the cabinetry, which is difficult to compare.

These are tactics commonly used by car dealerships for good reason – such discounts feel more tangible, legitimate and valuable on a big-ticket purchase.

While some of these principles may seem like common sense, in a market where pricing is a major pain point for customers, it’s important to go beyond the numbers and focus on clearly demonstrating value and instilling confidence.

If we were purely rational beings, only the actual price would determine whether a customer buys. However, the reality is that we’re emotional creatures making emotionally led decisions—especially when it comes to something as personal and expensive as a new kitchen or bathroom!