Why might a company choose psychological pricing for its products?

A company might choose psychological pricing primarily to enhance perceived value through pricing perception because this strategy targets the consumer's emotional response to price rather than just their rational assessment of value. By setting prices at levels that seem more appealing—like pricing an item at $9.99 instead of $10—companies can make their products appear more affordable and attractive. This approach taps into consumer behavior, where minor changes in price can significantly influence purchasing decisions, leveraging the psychology behind how people perceive numbers.

This pricing strategy plays on the idea that consumers may equate lower prices with greater value, even if the difference is only a few cents. As a result, using psychological pricing can lead to increased sales and brand loyalty, as consumers feel they are getting a better deal, which can improve overall business performance.