Retail industry expert and business lawyer, and former McKinsey consultant Mira Zaslove has published the five most common psychological strategies employed by businesses to part customers from their dollars.

It’s not enough to have a good product at the right price. In this dog-eat-dog world businesses need an edge; and here’s the favourite five:

1. The Anchor

Anchoring is deliberately placing an inferior highly priced item, not expected to sell, next to an item the store manager wants to unload. By comparison the lower priced item looks like a bargain

Zaslove uses the example of Williams-Sonoma, who had a breadmaker priced at $279, yet wasn’t selling. They mistakenly thought customers didn’t want the breadmaker because it wasn’t big or fancy enough, so they introduced another model for $429.

What happened? The $279 model started to sell.

2. Exclusivity

Some customers are status-buyers. They will look for and purchase the most expensive items they can. Retailers exploit this psychology by increasing the prices to reflect high status (regardless of whether the price reflects the value of the product).

Rolex, for instance, was believed to have increased its sales once it increased the price of its watches to make them appear as status symbols.

3. The Middle Price

Most customers, however, aren’t status-buyers. But most customers also want to avoid buying the cheapest products – and appearing miserly. Retailers capitalise on this by deliberately assigning a middle-priced item they want to sell.

  • In an experiment customers were offered two differently priced beers – a $2.50 premium and a $1.80 standard. 80 per cent chose the more expensive ($2.50) beer.
  • When a cheaper $1.60 priced beer was introduced, 80 per cent bought the new middle-priced beer at $1.80, 20 per cent bought the most expensive beer at $2.50, and no one bought the new cheap beer at $1.60.
  • Next time researchers removed the $1.60 beer and replaced it with a new super premium $3.40 priced beer. Again the majority of customers bought the middle option – now the $2.50 beer. A small number bought the $1.80 priced beer, with only 10 per cent opting for the status symbol $3.40 priced beer.

4. The Number Nine

Eight studies published between 1987 and 2004 have concluded that prices ending in the number 9 ($10.99, 49.99 etc) boost sales by an average of 24 per cent.

The University of Chicago and MIT collaborated on a study in which a catalogue was printed in three versions to test this phenomenon.

Each catalogue was sent to identically sized group samples. They each had a control price at $39. Experimental versions had identical items set at $34 and $44.

As predicted, there were more sales at $39 than at either of the other two prices – including the cheaper $34.

5. Make a Deal

Putting a ‘marked down’ sticker on an item boosts sales, whether it is actually reflective of a lower price or not. Many people (and we mean many) will buy products they don’t need simply because they are on sale.

Other tricks used by marketers include: Humorous or creative packaging, specific designs for target markets, and presentation of goods as luxury items.

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