Setting the price slightly below a round figure.

• A. Penetration pricing
• B. Sponsorship
• C. Psychological pricing
• D. Cost plus pricing

Answer: (C)

Perception of price drives buying decisions. Setting the price slightly below a round figure uses psychological pricing to make the amount feel cheaper than it really is. The small left-digit difference, like £9.99 instead of £10, tricks most buyers into perceiving better value and can nudge them towards purchasing, even though the actual gain in revenue from the price isn’t large. This relies on how people mentally process prices rather than on costs or market dynamics.

This isn’t about entering the market with a lower price to win share (that would be penetration pricing), nor about promoting the brand through sponsorship, nor about basing the price on costs plus markup (cost-plus pricing). Psychological pricing specifically targets how the price is perceived by consumers.