Pricing Isn’t Rational—And That’s Exactly Why It Works
Why Modern Pricing Strategy Needs Less Economics, More Psychology
In pricing, logic isn’t king, perception is. This might sound provocative, even heretical, to the spreadsheet-centric mindset still dominant in many pricing and commercial teams. But decades of behavioral science—and the latest success stories from global retail and manufacturing leaders—reveal the same truth: consumers are predictably irrational, and pricing strategies that acknowledge this outperform those that don’t.
At our Pricing Gym session on the 13th November with Special Guest Hasan Guliyev, pricing strategists and commercial leaders dissected how behavioral economics and shopper psychology are reshaping the pricing playbook across sectors. The insights weren’t theoretical—they were practical, proven, and often surprisingly simple.
Let’s unpack the key ideas.
Decoys, Anchors & Perception: Pricing’s Invisible Influencers
Take the case of a $250 breadmaker. It wasn’t selling. Most teams would default to price cuts. Instead, the company introduced a second, larger version priced at $500. It wasn’t meant to sell, just to exist. Suddenly, the original $250 model looked like a bargain. Sales soared. The $500 unit? Barely stocked.
This is the decoy effect in action—a classic behavioral bias where context changes value perception. Before, shoppers had no anchor. After, they had contrast. And contrast creates clarity.
Here’s the kicker: this tactic didn’t just drive sales—it protected margin. No discounts.
No erosion. Just framing.
Now imagine applying this mindset to every pricing tier, product launch, and assortment decision. It’s a lever most companies still ignore.
Promotions That Profit: The Two-Plus-One Paradox
Another powerful example came from a back-to-school campaign for stationery. Traditionally, the brand had offered a flat 20% discount—year after year, with little impact.
This time, they tested something bolder: a choice. Shoppers could either use a 20% shelf discount or activate a Buy 2 Get 1 Free (2+1) via a digital coupon app. On paper, 2+1 looked like a margin killer. But in reality, 86% of incremental sales came from single purchases.
Why? Because 2+1 acted as an anchor. It boosted awareness, added urgency, and reframed the 20% as a better option—without shoppers actually needing to bulk-buy.
The results:
Triple-digit sales uplift
Double-digit gross profit gains
No post-promo sales dip
Bigger category size
Improved retailer partnership
The lesson: psychology beats mechanics. When consumers feel they’re getting a deal—on their terms—they buy more, even if the deal isn’t mechanically superior.
Less Is More: Simplifying Choice to Drive Sales
Behavioral science tells us that too much choice overwhelms the brain. The famous jam experiment found that more options = lower conversion. It’s called the paradox of choice.
Costco proved this at scale: over 15 years, it reduced SKUs by 50% and doubled its sales. Why?
Because simplified assortments reduce decision fatigue, making buying easier.
Modern discounters like Aldi have mastered this too—not just with price, but by curating the assortment for the shopper.
From toothpaste to wine to consumer electronics, the evidence is clear: edit ruthlessly.
Your customers—and your P&L—will thank you.
When Pricing Drives Societal Good
Pricing doesn’t just shift margin—it shapes behavior. And when used ethically, it can deliver what many call the triple win: for the brand, the consumer, and society.
Tobacco pricing: Over decades, price hikes directly contributed to lower smoking rates, saving lives.
Alcohol-free drinks: Once quality and branding matched taste expectations, price premiums became acceptable—and behavior shifted.
Healthcare ethics: During COVID, one company refused to raise prices on critical devices despite huge demand, asking partners not to profiteer either. The result? Trust, long-term goodwill, and lives saved.
These aren’t PR stunts. They’re strategy. Pricing can lead. But only if we redefine success beyond short-term EBIT.
Getting Buy-In: The Hardest Battle Is Internal
Perhaps the most under-discussed part of behavioral pricing is internal: how do you convince your organization to abandon rational logic in favor of psychological nuance?
The answer? Trust. Humor. Visual metaphors. Empathy.
One team used a classic optical illusion—two equal arrows that appear different—to show that perception is reality. Another won support with pilot tests that delivered real P&L impact.
It takes courage to pitch the irrational. But behavioral pricing, done right, builds not just results—but belief.
Final Word: Price to Feel, Not Just to Function
This isn’t just theory. These are field-tested strategies that drive growth without race-to-the-bottom discounting.
So here’s the challenge: next time you plan a promo, a launch, or a price tier—ask not what makes economic sense. Ask what feels right to the shopper. What context, contrast, or cue might shift their perception?
Because in the end, the best pricing strategy doesn’t just outsmart competitors—it outsmarts assumptions.
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Laurent Dosogne is a partner at Nexo Consulting and host of the Pricing Gym, a peer-to-peer forum for pricing leaders to pressure-test ideas and share candid insights.
Hasan Guliyev is a Revenue Growth Management Lead with over eight years of experience driving commercial transformation in the FMCG/CPG sector. He currently leads Revenue Growth Management across the DACH region at BIC, overseeing all RGM levers - from pricing and promotions to pack architecture and portfolio strategy.
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