Just like puzzle pieces, little things also matter in value creation. You already get the feeling along the way, but the entire experience is revealed by adding all the parts.
We already discussed some psychological aspects of pricing, now we go even deeper. Let’s see how adding seemingly tiny things can influence the value you offer.
The concept of symbolic pricing is a fascinating psychological tool that leverages the human tendency to value things differently when they are "free" versus when they have a small cost.
When something is offered for free, it triggers a strong psychological response due to the zero-price effect:
If balloon inflation is free in a toy store, parents and children may feel no hesitation in asking for multiple balloons, even when they don’t really need them. This can overwhelm store employees and detract from their primary responsibilities.
Symbolic pricing involves setting a small, non-zero price to curb excessive demand and ensure only genuinely interested customers request the service. This price acts as a psychological filter:
Symbolic pricing can influence behavior as it reduces demand to sustainable levels. It ensures customers consider whether they truly need the service and it frees up employee time for higher-value tasks. When people pay for something, even a small amount, they tend to assign it higher value. This increases satisfaction and appreciation for the service.
The perception that higher price equates to higher quality is a powerful psychological principle known as the price-quality heuristic. This heuristic influences consumer behavior in various ways, particularly in situations where the actual quality of a product or service is difficult to assess.
Consumers often use price as a proxy for quality, especially when:
This belief stems from cognitive shortcuts that people use to make decisions efficiently. If something is expensive, they assume it must:
In case of luxury goods, designer brands might offer a €3,000 handbag, which is perceived as superior in quality to a €50 handbag, even though the functionality may be similar. The high price signifies exclusivity, craftsmanship of advanced materials, and status.
Studies show that people rate wine as tasting better when told it costs more, even if the wine is identical. This demonstrates how price directly affects perceived quality, even in subjective experiences like taste.
High prices are often paired with limited availability to enhance perceived value. For example, limited-edition sneakers with a €400 price tag are seen as collectible and higher quality due to their exclusivity.
But be aware! Pricing high can backfire when executed wrong.
To use the effect well, you can
The decoy effect describes how, when we are choosing between two alternatives, the addition of a third, less attractive option (the decoy) can influence our perception of the original two choices. Decoys are “asymmetrically dominated:” they are completely inferior to one option (the target) but only partially inferior to the other (the competitor). For this reason, the decoy effect is sometimes called the “asymmetric dominance effect.”
The target is the choice a business wants you to make.
The competitor is the option competing with the target that you might want to make.
The decoy is the option the business adds to nudge you towards choosing the target.
The decoy effect helps reframe the value for other products. You can read about how Netflix used an ad based option to create the effect.
The use case also describes the labour illusion. In behavioral economics, labour illusion refers to the phenomenon where individuals perceive products or services as more valuable when they believe that more effort or labour has been invested in their creation or delivery. That’s why showing the effort consciously can make the illusion work. So when registering and picking some genres or titles, Netflix gives “you the impression that somewhere, a server is processing thousands of data points to personalise an experience just for you."
The same happens at show bakeries or at restaurants where the kitchen is visible. You see the process, and you value the effort.
This insight touches on a key distinction in pricing psychology: the difference between absolute price (how much something costs) and perceived value (whether it’s "worth it"). Expensive is not something that has a high price, but which is not worth it.
Therefore the value the offering delivers must justify the price. This reflects the principle of value-for-money, where:
A €1,500 smartphone with cutting-edge features, durability, and great customer support might be seen as worth the price.
The perception of whether something is expensive depends on the features (delivery on its promises), the alternatives in the market (better or cheaper substitutes), the context (meal at a fine dining restaurant with exceptional service), or the emotional resonance (pride, prestige).
So expensive doesn’t mean high-priced—it means the price feels unjustified.
