E-Commerce Pricing Psychology

The Problem

You picked your price. But is it right?

Most store owners guess. They copy competitors. They add a margin to cost and call it done. None of these methods tell you if $49 converts better than $79, or if $99 is leaving revenue on the table.

The way you present your price impacts conversions significantly. Changing how customers perceive value without changing the actual price can increase conversions. 

And when you test actual price points, the range between optimal and suboptimal can mean $210 to $760 monthly revenue difference on a mid-sized store.

That’s not a rounding error. That’s your profit margin for the year.

Why Price Testing Matters

Price testing isn’t about being greedy. It’s about finding the point where you maximize revenue and serve customers at the price they perceive as fair. 

Test too low and you leave money on the table. Test too high and customers ghost you. 

The optimal price is somewhere in between and it’s almost never where you guessed it would be.

The Psychology Behind Pricing

Before you test, it’s useful to understand how customers actually perceive price.

Charm Pricing and the Left Digit Effect

We tend to process prices by looking at the first digit first. 

For example, a price of $19.99 feels significantly cheaper than $20.00. Even though the difference is one cent, the psychological experience is dramatically different. (source)​

That’s why we see so many .99 prices in stores even though most of us haven’t seen a 1 cent coin in a very long time!

It’s all about how human brains process numbers. The left digit anchors your perception before you even finish reading the full amount.

Other examples that work:

• Removing the currency symbol on expensive items reduces “pain of paying,” allowing customers to spend more
  
• Removing zeros (showing $5 instead of $5.00) makes prices look smaller on mobile
  
• Using .99 endings works better than round numbers in most cases

The Decoy Effect

If you offer three pricing tiers, the middle one typically wins. Introduce a fourth, lower-quality option, and customers skip it and choose the higher-priced tier instead. 

This is the decoy effect. (source)

For example, you’re deciding between three plans. Suddenly a fourth, obviously worse option appears. The third option (which was borderline) now looks like the perfect value.

Retailers use this constantly. Knowing it exists helps you design your pricing structure to guide customers toward the tier you want them to choose.

Perceived Value Over Actual Value

The psychological experience of receiving value is more compelling than the value itself. Customers buy the feeling, not the fact.

This is why showing savings percentage matters. A test on an ecommerce apparel store showed that displaying “Save 30%” next to a discounted price increased conversions compared to showing the raw price alone. (source)​

Same product. Same discount. Different messaging. Different results.

Why Stores Get Pricing Wrong

Mistake 1: Copying Competitors

Your competitor is guessing too. Just because they priced something at $49 doesn’t mean $49 is optimal. You’re following a guess, not data.

Mistake 2: Pricing for Cost Plus Margin

Cost plus margin is simple math but ignores what customers will actually pay. 

A product that costs $10 to make might sell for $25 (150% margin) or $75 (650% margin), depending on perceived value. Customers don’t know or care about your costs.

Mistake 3: Never Testing

75% of stores never test pricing. They set a price and leave it. 

This is the costliest mistake because the revenue impact of testing pricing ranges from 15-25% improvements. That means a store doing $100K annually could gain $15-25K in additional revenue from testing alone. (source)​

Mistake 4: Testing the Wrong Metrics

Some stores test price and measure clicks. Clicks don’t tell you if the price is right. Revenue per visitor does.

How To Test Pricing: The A/B Testing Framework

A/B testing for pricing splits your traffic into two or more groups, each exposed to a different price for the same product. Everything else remains identical: images, descriptions, layout, CTAs. (source)​

This isolation lets you see exactly how price impacts conversion rate, revenue per visitor, and average order value. No other variables muddy the results.

The Setup

Choose your test parameters and platform to run the tests:

• Primary metric: revenue per visitor (not conversion rate, not clicks). (source)​
  
• Connect your website to the split testing tool like Sigmize..
  
• Test duration: 2-3 full business cycles minimum to account for weekday vs. weekend behavior. (source)​
  
• Sample size: large enough to be statistically significant (most tools calculate this for you)

Select your price points:

Test three price points: your current price, one lower, one higher. This gives you a baseline and shows you if pricing elasticity is positive or negative. (source)​

Example: If your current price is $79. Test $59, $79, $99.

Run the test:

Let each group experience the price for the full duration. Measure revenue per visitor, conversion rate, average order value and cart abandonment rate for each. (source)​

Real-World Results

Case study data from pricing tests shows:

• Subscription business in a price war: Increasing prices 51% grew revenue 16% (and freed them from competing on price alone)
  
• SaaS company: Price increase on plans generated 17% revenue growth
  
• Services company: 234% price increase reduced signups by only 22%, growing total revenue 160%

None of these required new product development. Just better pricing.

Moving Beyond Single Price Tests

Incremental Testing

Don’t just jump immediately from $49 to $99 as that can cause price shock if people are familiar with your products. Test in steps: $49 to $59, then $59 to $69. 

Small increments let you identify where elasticity breaks and customers start leaving. (source)​

Segmentation and Tiered Pricing

Different customer segments have different price sensitivity. First-time buyers might need a lower entry point. Returning customers might accept higher prices.

Test pricing by segment:

• New visitors at $49
  
• Returning visitors at $59
  
• VIP repeat customers at $69
  

This approach often produces 15-20% revenue increases without raising prices across the board. (source)​

Seasonal and Contextual Pricing

Demand fluctuates. Test higher prices during peak seasons. Test lower prices during slow periods to drive volume. 

This kind of dynamic testing can increase revenue by 10-20% annually without damaging brand perception.

Payment Plan Testing

Offer installment options alongside full price. A test on ecommerce sites showed that visibility and format of payment plans significantly impact conversions, especially for higher-priced items. (source)​

Example: $300 product. Option 1: “$300 today.” Option 2: “$75 per month for 4 months.” Same total price, different psychology. Test which converts better.

Real Price Test Examples

Example 1: Display Discounts Strategically

A test compared two discount presentations on the same product: (source)

• Version A: “$100” (no discount shown)
  
• Version B: “$100 (Save 20%)”
  

Version B showed 8-12% higher conversion rate. Customers didn’t recalculate the math. They saw “Save 20%” and felt they got a deal.

Example 2: Charm Pricing Works Across Categories

Convert.com reviewed 500 ecommerce A/B tests and found consistent patterns:​

• Prices ending in .99 consistently outperformed round numbers
  
• Removing currency symbols on high ticket items reduced “pain of paying”
  
• On mobile, removing zeros ($5 vs $5.00) made prices look smaller
  

The effect varies by category, but charm pricing consistently won.

Example 3: Price Increase Revenue

A services business tested raising prices. They went from $79 to $99 to $119. 

Revenue increased at the higher price point because customer acquisition cost stayed the same but revenue per customer rose. They served fewer customers but made more profit.

Tools and Execution

Where To Run Tests

Most modern ecommerce platforms support native A/B testing:

• Shopify: Built-in A/B test feature
  
• WooCommerce: A/B testing plugins available
  
• Custom platforms: Use third-party tools like Sigmize.

What To Measure

Track these metrics for each price point:

• Conversion rate (percentage of visitors who buy)
  
• Average order value (total revenue divided by orders)
  
• Revenue per visitor (total revenue divided by traffic)
  
• Cart abandonment rate (carts created but not purchased)
  
• Customer acquisition cost (ad spend divided by new customers)
  

Focus on revenue per visitor. That’s the metric that determines if a price is winning or losing.

How Long To Run Tests

Minimum 2-3 full business cycles. For most stores that’s 2-3 weeks. 

This accounts for:

• Weekday vs. weekend traffic patterns
  
• Seasonal variations (if your store has them)
  
• Statistical significance (enough data to trust the result)
  

Running a test for one day or one week is almost always too short.

The Budget Impact

Testing price is cheap compared to the upside.

A single pricing test using your current platform’s A/B testing tools costs near zero. If you use a dedicated A/B testing tool like Sigmize, expect $249+ depending on traffic volume.

Compare that to the potential upside: 15-25% revenue increases from pricing optimization. On a $50K annual store, that’s $7.5K-$12.5K in additional revenue. 

Paying $200 for a tool is an obvious investment.

Your First Pricing Test: 3-Week Sprint

Week 1: Analyze and Plan

• Pull your last 3 months of sales data
  
• Calculate your current revenue per visitor
  
• Identify your best-selling product categories
  
• Choose one category to test (start small, prove the concept)
  
• Decide on three price points to test

Week 2: Set Up and Launch

• Configure your A/B test tool (split traffic 33/33/33 across three prices)
  
• Ensure tracking is correct (revenue per visitor is being tracked, not just clicks)
  
• Launch the test to 100% of traffic
  
• Document your hypothesis: “Price X will generate higher revenue per visitor than prices Y and Z”

Week 3: Monitor and Decide

• Check results halfway through the week (for sanity check only)
  
• Let the test run full cycle (2-3 full weeks minimum)
  
• Analyze results at the end
  
• Roll out the winning price to 100% of that category
  
• Plan your next test based on what you learned
  

What To Test Next

After your first pricing test wins, here’s what to test:

1. Payment plan visibility on high-ticket items
   
2. Discount presentation ($10 off vs. 20% off)
   
3. Price display format (with/without currency symbol, with/without zeros)
   
4. Segment-based pricing (different prices for new vs. returning customers)
   
5. Bundle pricing (single product vs. bundle discount)
   

Each test builds on the last and your learning compounds (and profits increase).

Why Price Testing Beats Guessing

You could hire a pricing consultant for $5K-$10K or run A/B tests for $100-500 and get data from actual customers.​

We think data from your customers beats consultant opinions every time!

Pricing psychology matters. Charm pricing, the decoy effect, perceived value all influence how customers perceive price. But none of it matters if you don’t test against your actual customer base.

The good news: testing is easy, cheap and fast. The faster you test, the faster you find revenue.

Start Your Pricing Test This Week

Stop guessing. Stop copying competitors. Run a 3-week test on your best-selling product and measure revenue per visitor. You’ll know your optimal price point, and you’ll have real data to back up your next price change.

The difference between optimal and suboptimal pricing can be hundreds of dollars a month!

Know which pricing works for your business now.