5678 (Toll Free) or +260 211 232657/222787                             This email address is being protected from spambots. You need JavaScript enabled to view it.                                                                    WEBMAIL  

How psychological pricing may affect consumers

By Brim Lombe

There are many pricing strategies that marketers and business owners use to price their products and services. The pricing strategy used is heavily dependent on the corporate objectives of the business. One of the pricing strategy that has become very common among business entities especially supermarkets and retail stores in Zambia is psychological pricing also known as price ending or charm pricing.

 

Psychological pricing can be defined as a marketing or pricing strategy that is designed to get consumers to respond to a product or service on an emotional rather than rational basis. The concept aims at playing with consumers emotions in order to increase sales for the company. Simply put, it is the kind of pricing that uses prices such as K 9.99 instead of K 10.00.

We know that K 9.99 is K 10.00 less one ngwee but consumers will look at it as a better bargain as they will tend to think a product is cheaper where they will get it at K 9.99 as opposed to where they will buy it at K 10.00. This pricing strategy has become very common here in Zambia. Chain, multinational and other retail stores use this pricing strategy to increase their sales.

Psychological pricing is a legal and good pricing strategy for traders. However, if not carefully planned for and executed, it may violate certain sections of the Competition and Consumer Protection Act No 24 of 2010 of the Laws of Zambia. For example section 51 of the Act which looks at price display clearly explains that,” a person or an enterprise shall not charge a consumer more than the price indicated or displayed on a product or service.”

Therefore, psychological pricing may violate section 51 of the Act if the trader is unable to give the consumer their balance (change) after a purchase has been made. For example, if a consumer buys bread at the cost of K 9.99 the trader should give the consumer back their balance of one ngwee.

However, this may become a problem as there are no one ngwees in circulation in the Zambian economy. Therefore, the trader may be forced to round off the amount to K 10.00 hence abrogating Section 51 of the Competition and Consumer Protection Act as explained above. Similarly, the concept of using psychological pricing may also be deemed as contravening section 45 (b) as read together with section 46 (1) of the Competition and Consumer Protection Act which prohibits traders from engaging in unfair trading practices.

Traders should not at any cost compromise the standard of honesty and good faith that consumers expect them to meet when applying this concept of psychological pricing.

Psychological pricing if haphazardly used may also contravene section 47(b) (i) which clearly stipulates that,” a person or enterprise which makes a false or misleading representation concerning the price of any goods and services is liable to pay the Commission a fine not exceeding ten percent of that person’s or enterprise’s annual turnover or one hundred and fifty thousand penalty units, whichever is higher.”

So, if a trader voluntarily displays the price of bread as K 9.99, the consumer should not be made to pay K10.0 as that would be tantamount to misrepresentation. Remember, it is not about the monetary value involved but the principle that should not be used to the detriment of consumers.

In this vain, traders have a role to play in ensuring that they uphold fair trading practices by applying the psychological pricing strategy in a fair and consumer friendly manner in order to avoid abrogating the law.

They can for instance use user-friendly figures such as K 1.95 instead of K 2.00 as it would be easier to give the consumer their balance of 5 ngwee which we have in circulation. By so doing the traders would be averting contravening the Competition and Consumer Protection Act. Similarly, consumers also have the right and obligation to demand for their balance or change from the traders after making a purchase.

About CCPC

The Competition and Consumer Protection Commission (CCPC) is a statutory body established with a unique dual mandate to protect the competition process in the Zambian Economy and also to protect consumers.

Get in touch

Competition & Consumer Protection Commission
4th Floor Main Post Office Building
P.O Box 34919
Lusaka
+260 211 232657/222787

5678 Toll Free

zcomp@ccpc.org.zm

Connect with us

Sign up to our newsletter:

Picture Gallery