Navigating the current retail landscape is challenging for all of us. US trade tariffs have heightened economic uncertainty, competitive pressure is constant, and consumers are savvier than ever, thanks to the ability to cross-check prices across retail platforms in seconds.
According to the EY Future Consumer Index, 57% of UK consumers now rank price as the most important factor when choosing a brand.
Pricing success comes from being informed and intentional. That means using data and insights not just to keep up with the market, but to lead it.
It’s tempting to base pricing on the assumption that we are rational calculators who calmly weigh cost and value. But the reality is, humans don’t shop with spreadsheets – we shop with shortcuts and subconscious biases.
We recently partnered with behavioural scientist Richard Shotton to look at the psychology of pricing and the biases that influence consumers, often on a subconscious level.
“Behavioral science reveals why perceived value often outweighs actual cost, and how context, framing, and expectation shape what people are willing to pay,” Shotton explains. ”A 99p price isn’t just convention, it’s a psychological trigger. And higher prices don’t always deter – sometimes they do the opposite.”
The power of charm pricing
One of the behavioural science insights we delve into is charm pricing. It’s not new: 99p prices have been around since the dawn of selling. But there’s now a large body of evidence to show how well these charm prices work. One study showed a difference of 51% in conversion.
Acuity Pricing data shows Tesco, Asda, Sainsbury’s and Morrisons use charm pricing on less than 1% of their grocery and beer, wine and spirit ranges; whereas Aldi uses charm pricing on 22%.
These evidence-backed, low-cost, and easy-to-apply techniques will enhance pricing power, reduce price sensitivity and increase profitability.
- Present bias: What happens in the present matters much more to people than what happens in the future. Shoppers are less price-sensitive if payments are pushed into the future. Brands could allow customers to pay in installments or offer a lower initial payment followed by higher payments.
- Precise pricing: Related to charm pricing, specific prices (such as £20.12 rather than £20) are perceived as more trustworthy and less inflated than rounded ones, allowing for higher charges without dampening demand.
- Decoy effect: Choosing between two products can be tricky for people if the options vary on attribute, such as price and size. Introducing a third, less appealing option (the decoy) can make a target offering seem more attractive and simplify decision-making.
- Unit reframing: People focus on the size of the number. Expressing prices in the smallest possible unit (for example per serving or daily cost) makes them appear more appealing.
- Differential price framing: Price framing is another way to ensure the number shown is the smallest possible. Showing the additional cost for an upgrade rather than the total new price increases adoption of higher-priced offerings.
By embracing behavioural insights, alongside powerful pricing data, retailers can create pricing strategies that resonate with how consumers actually make purchase decisions and transform pricing into a powerful tool for building value perception and customer loyalty.
Sophie Bailey, MD, Acuity Pricing
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