Tuesday, February 16, 2010

Psychological Pricing

Psychological pricing occurs when sellers consider the psychological factors of price not simply the economics (Kotler, 276). Examples of this strategy exist all through the market one of which is the pricing of UGG slippers. The UGG brand has swept through that fashion world in recent years attracting consumers around the world from many different demographics but competitors have offered similar products in the past without this same result. The price tag on a pair of moccasin UGG slippers is $100. The price on a pair that looks almost identical, sold at L.L. Bean is half that at $49.95. The difference in price is not due to a drastic difference in quality, both are made from sheepskin and both have indoor/outdoor soles, the difference in price is an example of psychological pricing. The UGG brand prices their product higher because consumers look to the brand as a higher quality option even if actual improvement in quality is minimal. The psychological pricing scheme is meant to keep consumers thinking that the UGG brand produces the highest quality sheepskin shoes, enticing buyers into buying their products.

The L.L. Bean Slipper: $49.95

The UGG Slipper: $100

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