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Shreya Shrivastava
01/04/2025
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Overview
The psychology of pricing is a powerful tool brands use to shape consumer perception and drive sales. Luxury brands employ high prices as a gatekeeper, creating exclusivity and perceived value, while mass-market brands use aggressive pricing strategies like discounts and psychological pricing to capture market share.
Explore the tricks brands use—like ₹999 pricing and "limited-time offers"—and learn to outsmart them. Brands strategically decide their pricing position based on their target audience, desired brand perception, and market competition. This is your guide to mastering the game of price perception.
Table of contents
Ever wondered why some brands slap an eye-watering price tag on a handbag, while others practically give away their products with discounts? It’s not just about covering costs—it’s a carefully crafted strategy. Pricing is more than just numbers; it’s a powerful tool that shapes how we perceive brands, influencing our buying decisions before we even realise it.
Just like product designers design products we desire to buy, pricing experts ensure that price is never a barrier to their marketing efforts. Let’s dive into how brands use the psychology of pricing to establish their identity, perceived value engineering, filter their customers, and win the market.
Luxury brands are all about exclusivity. The higher the price, the more unattainable the product feels, which in turn makes it more desirable. Think of brands like Chanel, Rolex, or Rolls-Royce. Their customers aren’t just buying a handbag, a watch, or a car—they’re buying prestige, status, and a sense of belonging to an elite club.
High prices act as a natural filter. They ensure that only a select group of customers can afford to engage with the brand. This isn’t just about making a profit; it’s about maintaining an image. If everyone had access to a Birkin bag, would it still be special? Probably not. That’s why these brands rarely offer discounts or sales—doing so would dilute their exclusivity.
But it’s not just about keeping the masses out. Luxury brands also use price anchoring, where they release an ultra-expensive product to make their other high-priced items seem more "reasonable" by comparison. The result? Customers feel like they’re making a smart purchase, even when they’re spending thousands.
On the flip side, mass-market brands thrive on affordability. Their goal is to reach as many customers as possible, making pricing their biggest weapon. Brands like Amazon, H&M, and Xiaomi focus on volume—selling a lot at lower prices instead of fewer products at a premium.
To ensure competitive pricing, these brands use strategies like:
These strategies make customers feel like they’re getting the best deal, which builds loyalty and ensures repeated sales. In a world where consumers are spoiled for choice, pricing can be the deciding factor.
How Brands Decide Whether to Position Themselves as “Affordable” or “Exclusive”
Every brand has to decide where it stands on the pricing spectrum. But how do they make that choice? It all comes down to three key factors:
Who are they selling to? If a brand wants to cater to high-net-worth individuals, it will set high prices to signal quality and exclusivity. If it’s targeting budget-conscious shoppers, affordability becomes the priority.
The way a brand wants to be perceived influences its pricing. A high price can create a sense of luxury, while a lower price can make a brand seem accessible and mass-market. Once a brand commits to a position, it’s hard to switch—imagine if Apple suddenly started selling budget smartphones!
Brands also look at their competitors. If a market is flooded with budget options, a brand might choose to go premium to stand out. Alternatively, if high-end products dominate, a company might disrupt the market with affordability.
Ever felt like you got an amazing deal—only to realise later that you might have spent more than you intended? That’s not by accident. Brands use clever pricing tricks to influence how we perceive value and make us more likely to buy. Understanding pricing psychology is key to influencing consumer behavior. Let’s break down some of the most common tactics and why they work so well.
Have you ever wondered why so many products are priced at ₹999 instead of ₹1,000? It’s called psychological pricing, and it’s based on a simple trick—our brains tend to focus on the first digit. ₹999 feels significantly cheaper than ₹1,000, even though the difference is just one rupee.
Retailers love this pricing strategy because it creates the illusion of a lower price while still being close to a round number. It’s subtle but incredibly effective.
Walk into any supermarket, and you’ll see prices ending in .99, .95, or bundled deals like "Buy 2, Get 1 Free." These strategies aren’t just random—they’re designed to make you feel like you’re getting the best possible deal.
These tactics make us spend more while feeling like we’ve saved money.
Most people choose the EMI option because smaller payments feel more manageable. That’s price framing in action. Even though you might end up paying more over time (with interest or hidden charges), breaking down a large number into smaller chunks makes it seem less intimidating. It’s why brands push EMI options so aggressively.
Ever seen a countdown timer on an online store? Or a "Hurry! Only 2 left in stock" message? These tricks create artificial urgency to make you buy on impulse. Flash sales and limited-time deals make us think we’ll miss out if we don’t act fast, even when the discount isn’t that significant. In reality, many "limited-time" sales are just marketing gimmicks that repeat frequently.
Price positioning shapes a brand’s market perception, especially for premium brands. Leveraging price tricks and decision heuristics, businesses influence price sensitivity and value proposition. Premium brands avoid words like "sale" or "discount" because they can cheapen the brand image. Instead, they offer "exclusive member pricing," "early access," or "limited-edition pricing."
This keeps the sense of exclusivity intact while still giving customers the feeling of getting a special deal. Smart pricing strategies, including price promotions and discount psychology, impact perceived value, especially for premium brands facing budget constraints.
On the other end of the spectrum, luxury brands don’t just use pricing tricks—they use pricing as a status symbol. Here’s how they make us willingly pay more.
Ever walked into a high-end store and noticed there are no price tags? That’s deliberate. Luxury fashion designers want the focus to be on the experience, not the cost. If you have to ask the price, it signals that you might not be the target customer. And if you don’t ask, you’re more likely to make an emotional, status-driven purchase rather than a budget-conscious one.
When a brand doesn’t reveal the price upfront and says "Price Upon Request," it creates intrigue and exclusivity. It makes customers feel like the product is so premium that its value can’t be reduced to just a number. This technique works because it shifts the conversation from affordability to desirability. If something is hard to obtain, we naturally want it more.
A luxury product isn’t just about the product itself—it’s about the entire experience.
All of this makes customers feel like they’re getting something truly special, even when the actual cost of materials may not be much higher than a regular product.
Ever noticed how we obsess over getting the best online deal but rarely question in-store prices? That’s not a coincidence—brands carefully control pricing strategies to shape how we perceive value. Let’s break it down.
When shopping online, we have endless options at our fingertips, making price comparisons second nature. But in a physical store, we’re limited to what’s available, and our decision-making shifts.
Brands know this and often price products higher in stores, banking on convenience and immediate gratification.
“Free shipping on orders above ₹999.” Sound familiar? This pricing trick is designed to make you spend more just to avoid paying for delivery. Instead of thinking, “I only need one item,” we think, “Let me add something extra so I don’t waste money on shipping.” In reality, we end up spending more than intended—exactly what the retailer wants.
Cashback offers feel like an instant win, but they’re just another way to keep you spending within a brand’s ecosystem.
Ever seen a product priced cheaper online than in a physical store? Brands strategically create pricing gaps to drive sales where they want.
This dynamic pricing strategy ensures that no matter where you shop in retail stores or online commerce, the brand wins. Understanding price elasticity and price comparison helps optimise pricing strategies to maximise consumer engagement and profitability.
Beyond pricing tactics, brands tap into deeper psychological triggers that influence our spending decisions. Here’s how they do it.
Ever haggled over ₹100 in a street market but paid double for a cab without blinking? That’s because context matters.
Brands use this difference to charge premiums in situations where we feel we have no choice.
Ever justified an expensive purchase by thinking, “I work hard, I deserve this”? That’s exactly what luxury businesses want you to feel.
When a brand successfully taps into our emotions, price becomes secondary to the feeling of self-reward. Strategies like value-based pricing, psychological pricing, and price anchoring shape price perception and willingness to pay.
Why does spending ₹5,000 on a fancy dinner feel excessive, but spending ₹5,000 on a fitness tracker feels justified? It’s all about purchase justification.
Brands carefully frame their products to make us feel like we’re making a smart, justifiable decision—even when we’re splurging.
Ever received a “You made a great choice!” email after buying something? That’s not just good customer service—it’s a psychological reinforcement strategy.
By making us feel good about our purchases, brands ensure we keep coming back for more.
Indian consumer behaviour has evolved significantly, blending traditional values with modern aspirations. Today’s buyers, particularly Gen Z, prefer subscription models like Netflix and Rent It Bae over ownership, valuing convenience and flexibility. According to a 2024 Statista report, India had around 6.5 million Netflix subscribers, reflecting Gen Z’s preference for digital-first experiences. In contrast, Boomers and Gen X prioritise savings and durability, while Millennials balance price and quality.
Homegrown brands like FabIndia, Hidesign, and Titan thrive due to their cultural relevance, quality, and affordability. FabIndia, for instance, recorded revenue of ₹1,556 crore in FY23, reflecting its enduring appeal. While global brands like Zara and Levi’s attract attention, Indian consumers often return to heritage brands for authenticity and craftsmanship. Additionally, spending is shifting from price-consciousness to experience-driven indulgence. Platforms like Zomato Pro and Airbnb highlight this shift, where experiences are valued over material goods. Zomato Pro, for instance, reported a 50% increase in subscriptions after the pandemic, reflecting growing demand for premium experiences.
Global brands entering India adapt their pricing to align with local expectations. Luxury brands like Louis Vuitton are more expensive in India due to high import duties and limited availability, prompting affluent buyers to shop abroad. India imposes customs duties of 18–28% on imported luxury goods, significantly raising prices. On the other hand, brands like IKEA, Starbucks, and H&M modify pricing and introduce localised offerings to capture Indian market segments. For example, IKEA India recorded a 30% revenue growth in FY23, driven by its affordability and localisation strategies.
The concept of “paisa vasool” (value for money) remains central, where consumers seek maximum value rather than the lowest price. International brands walk a fine line between maintaining aspiration and ensuring accessibility by offering “affordable luxury” options, tiered pricing, and strategic promotions. Brands like Coach and Michael Kors thrive by offering high-end appeal at lower price points, catering to India’s aspirational yet price-sensitive consumers.
Ultimately, Indian consumers navigate a nuanced marketplace where tradition meets aspiration. For brands, success lies in understanding this balance and adapting strategies to align with evolving expectations.
Did you enjoy this read? Author, Shreya helps you with a Comprehensive guide to 2025 fashion design entrance exams like NIFT, iDAT; includes exam dates, patterns, eligibility, and preparation tips.
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