B2B Psychological Pricing Strategies: Examples + Pros & Cons

B2B sales is hardly about pure selling anymore – it’s about building trust with customers. In fact, 63% of customers report that a company’s reputation is the most important factor in buying decisions. With that in mind, while using psychology in B2B pricing can be powerful in boosting trust and brand credibility, it can just as quickly have the opposite effect.

Given the diversity and challenges inherent in the B2B world, psychological pricing strategies can have varying degrees of impact, making their strategic application all the more crucial for ensuring profitable outcomes.

Here at Pricefx, we’ve spent more than a decade helping our B2B customers execute their pricing strategies successfully with the help of our cloud-native pricing software solutions, and we’ve seen firsthand that the effective use of psychology lies at the heart of profitable outcomes.

In this article, we’ll walk you through the art of psychological pricing in B2B selling, including common examples of psychological pricing and their pros and cons in the B2B context, so your business can employ these techniques with confidence while being mindful of their potential risks and rewards.

Understanding Psychological Pricing Strategies in the B2B Context

Much of the knowledge available to us on psychology in pricing is largely centered around B2C scenarios, particularly within the retail sector, and often overlooks the nuanced dynamics and challenges that are native to the B2B selling environment.

How Are B2B Sales Different Than B2C Sales?

These are some of the key factors setting B2B and B2C selling apart that are important to keep in mind when considering the effective use of psychology in pricing:

• More “human” buyer-seller relationships: B2B relationships are personal in nature, with a higher premium placed on trust and building long-term connections than satisfying immediate consumer needs, as is often the case in B2C.
• Extensive and complex sales cycles: The buying process involves longer and more intricate sales cycles, with the largest buying groups spanning multiple roles, departments, and markets, while B2C consumers often arrive at a buying decision with minimal intermediary support.
• Logic-driven decision-making: As a product of negotiation, B2B buying decisions are driven by logic, in stark contrast to the more straightforward, often impulse-driven nature of consumer decision-making.

What Are Their Implications for Psychology in B2B Sales?

With those distinctions in mind, how, then, do they inform how B2B sellers can use psychology in the sales process?

Here are some key best practices for B2B psychological pricing to leverage, informed by the strengths and limitations of this unique selling environment:

• Practice subtlety and tact: B2B buyers are quick to discern any attempt at manipulation, and strategies perceived as dishonest can lay the groundwork for uncomfortable and strained business interactions in the long term.
• Emphasize value and mutual benefit: Presenting prices as mutually beneficial, particularly in improving financial metrics like ROI and cost reduction, is crucial to getting buyers on board. Ultimately, the most successful pricing strategy reinforces the value proposition of your products.
• Remember that some psychological strategies won’t land: Many of the same tricks used in B2C environments aren’t appropriate in B2B, especially those which make a broad sweeping appeal to emotion; oversimplifying the needs of your buying group disregards the complexity involved in their resource allocation process.

Examples of Psychological Pricing Strategies

To start off, let’s review a few of the most common psychological pricing strategies used in the B2B world today, in addition to the contexts in which they facilitate the most optimal results.

1.   Charm Pricing

If you don’t immediately recognize charm pricing by name, as a consumer, you are likely intimately familiar with it already. Charm pricing is a common psychological strategy that involves lowering a price by a single unit, typically resulting in an odd number (e.g., 5, 7, or 9) — for example, reducing a $500 spare part to $499.

This strategy is a play on the belief that consumers subconsciously avoid pain when perceiving price and register the first digit of a price more strongly than the last, a phenomenon coined the left-digit effect.

The strategy can vary in its impact on customer perception of quality, so it should be approached with some trepidation to avoid inadvertently communicating the wrong message, particularly for premium products.

2.   Pricing Anchoring

Price anchoring is the practice of setting a reference point (or “anchor”) for a product in order to shape a buyer’s perception of the pricing of products around it. Because what better way to sell a midrange $6,000 product than by placing it next to a $10,000 product?

For example, in distribution, sellers can use the price of standard shipping as the anchor point for higher pricing for expedited shipping and express shipping, effectively reinforcing the value of the more premium options for their customers.

The strategy is also useful in discounting, as without it, there is little indication any savings have been made at all; a reduced price of $200 for a spare part is perceived as attractive only when placed in context of the original $350 price bid.

3.  Price Framing

Although similar to price anchoring in its focus on the buyer’s tendency to compare prices to determine the best choice, price framing is more reliant on demonstrating price differentials than fabricating an initial “anchor” price to influence customer perception of price.

B2B sellers can use this technique to present their price of middle-range products as attractive by discussing how much their customers can save compared to premium options, shifting attention from the price itself. Price framing is especially palatable to loss-averse customers whose primary concern is their saving potential.

Framing is just as much about the language sellers use to communicate their prices to customers; presenting a price as a discount is likely to elicit a positive reaction, while conversely, framing a price as an upcharge rather than a value-add is unlikely to be very convincing.

4.   Prestige Pricing

Prestige pricing, otherwise known as premium pricing, is the strategy of communicating the superior value of a product or service with premium prices, drawing from our natural inclination to conflate quality with higher prices.

In the B2B context, this strategy is often used to justify premium price points in niche industries that offer unique solutions, like boutique consulting, high tech, and bespoke manufacturing, but can also be used in any industry to establish a clear distinction in value between offerings.

For prestige pricing to be palatable to consumers, higher prices should be perceived as proportional to the added value the product or service promises. This perception, along with maintaining a stable premium brand image, supports long-term acceptance of premium pricing.

5.  Price Partitioning

As the name suggests, price partitioning is the strategy of breaking down prices to their core components instead of delivering a total price to customers.

In the automotive industry, car manufacturers know that the overall cost of producing a vehicle can appear intimidating, which is why presenting the price part by part can make it easier to digest and even be considered fairer.

Given the volatile state of the global economy, it’s easy to appreciate the positive impact of line-by-line pricing on customer buying behavior. Cost-conscious customers particularly value the transparency that this kind of granularity provides. Otherwise, a lump sum cost in invoicing could give the impression of an artificially inflated price, followed by skepticism and follow-up questions from your customers.

What’s more, the risk of using price partitioning is minimal – there is almost no likelihood it will cause friction with customers. The worst that can happen is one of your more proactive customers calls you up one day to point out an error in your price calculation (although, we have to say that this should be a rare event when using automated pricing tools).

Pros and Cons of Using Psychology in B2B Pricing

The art of pricing always involves a healthy dose of psychology, with the key word here being healthy – as in, in the right amounts and in step with the business and market context. The following areas can be significantly influenced by using psychological pricing in B2B sales, either positively or negatively.

1.     Reinforcing the Value Proposition of a Product

The Good News: Prices Communicate Value Before You Do

Psychology and price are intrinsically connected in the effort to demonstrate value to customers. While prestige pricing uses price to communicate high quality and value (even before customers have a clear understanding of the superior benefits the product offers), comparatively low prices have their own merit in showcasing the value of satisfying basic needs and supporting cost savings.

The Risk: Misalignment in Pricing and Expected Value Breaks Trust

Whether a product is priced high or low, the best results come from striking the right balance between perceived value and affordability to maintain trust with your buyers. To that end, any detected mismatch from customers between price and the value they expect will produce unsuccessful results. Priced too low, and customers may be skeptical of its quality. Priced higher than the value communicated, and customers may feel swindled.

2.    Increasing Sales

The Good News: Short-Term Profitability

Several independent studies have shown that charm pricing leads to a 24% boost in sales. The strategy is particularly useful in short-term efforts, such as clearing excess inventory quickly, making it a good strategy to experiment with incrementally.

The Risk: Not Always a Viable Sales-Driver in the Long Term

While psychological strategies like charm pricing can produce short-term wins, others might not always be a sustainable approach in the long term. For example, relying too heavily on short-term discounts could produce unpredictable revenue patterns, as well as condition customers to expect regular discounts, which can pose challenges to long-term profitability.

3.  Capturing Diverse Customer Groups and Markets

The Good News: Tailored Strategies Win Over All Types

If done well, psychology can be a powerful tool to communicate different points of value that cater to the diverse needs of a wide range of B2B customers, from multinational enterprises seeking cost-saving solutions at lower prices to emerging startups in need of high-quality offerings at competitive rates.

The Risk: One-Size-Fits-All Strategies Can Alienate

Psychological pricing that approaches its audience one-dimensionally harbors the risk of turning off some customer segments who feel the price offer doesn’t represent their needs. Strategies should be tailored to each customer to account for differentiating factors like willingness to pay and business objectives. This should also extend to the market context, as receptivity or skepticism towards specific strategies can vary, too, which can be addressed with market research.

4.  Facilitating Decision-Making in Purchasing

The Good News: Simplified Decision-Making for Quicker Buying

Psychological techniques, particularly the use of anchoring, help customers make faster buying choices by clearly laying out the best option for them. For example, including a basic, standard, and premium option simplifies choices and guides customers towards the right one for their needs, ultimately empowering them with a sense of control over their decision-making and a streamlined buying process.

The Risk: Limited Exploration of Alternative Options

Simplifying buying choices through artificial constraints like tiered plans could inadvertently cause customers to overlook add-ons or customization, which limits opportunities to upsell and enhance the customer experience. Facilitating a painless buying experience while still leaving room for a discussion of additional benefits is crucial to mitigating this risk.

The key takeaway here is that psychology in B2B pricing should always work with, not against, the distinct needs of your customers and their perception of the value you can offer them. The good news? Used well, psychological pricing in B2B selling can facilitate more sales, faster buying decisions, and overall customer satisfaction in the long term.

How to Choose the Right Pricing Strategy for You

At the end of the day, a successful B2B salesperson effectively communicates the value of their products or services. Customers need this to perceive the price as fair, whether achieved through a bit of psychology or simply by clearly outlining how the price aligns with the benefits they can expect to receive.

For further reading on the best pricing strategies for your business, consider checking out our ultimate guide to narrow down your choice, or, if your company is confident in its approach and would like to implement its strategies effectively, head over to our pricing strategy implementation guide: