The Psychology of Prices

The fascinating infographic we share today focuses in on the psychology of pricing strategy.

In other words: do the actual pricing options provided to a consumer influence overall buying behavior? It turns out the answer to that is a “yes”, and studies show that the extent to which it is a factor in buying decisions is actually very significant.

Aside from just being interesting information, we reckon that there is a parallel with finance and investing as well that may be worth a look.

Investors, like customers, like to get value with what they buy. That’s why, ultimately, the option they choose is a reflection of the prices offered to them as well as the perceived value of each option.

This “perceived value” changes based on the options offered. For example, when potential customers are offered only two subscription options for The Economist (web-only or web + print), only 32% of students would take the more expensive web + print edition. However, when a “decoy” option was added in, offering the print-only edition at a similar price, the amount of web + print subscriptions jumped from 32% to 84%.

What biases do investors or speculators have towards securities that are perceived to have “value” in a given instance?

This is a question worth some self-reflection, because sometimes investors can be their own worst enemies.

Original graphics by: Blog-Growth