CPM Price Psychology & Behavioral Economics Flashcards

Scarcity messaging ('Only 3 left in stock!') increases purchase intent by activating:

Answer: Loss aversion and fear of missing out (FOMO)

Scarcity signals trigger fear of loss and urgency, which behavioral research shows increases willingness to pay and purchase intent.

In subscription pricing, which behavioral principle explains why annual plans have lower churn than monthly plans?

Answer: Sunk cost effect — customers feel committed after a large upfront payment

Having paid a lump sum upfront, customers feel psychologically invested and are less likely to cancel during the subscription period.

The 'compromise effect' in pricing predicts that consumers tend to choose:

Answer: The middle option when three price tiers are presented

When three options are available, buyers tend to select the middle tier, making it a strategically important price point.

Reference price theory holds that consumers evaluate a price by comparing it to:

Answer: An internal or external standard price stored in memory or visible in context

Reference prices can be internal (past purchase memory) or external (displayed original price), and deviations from them drive perceived value.

Price-quality inference refers to the tendency of buyers to:

Answer: Use price as a signal of quality when product information is limited

In low-information purchase environments, a higher price signals higher quality, leading some segments to prefer pricier options.

Temporal reframing of a price (e.g., 'Less than a cup of coffee per day') is designed to:

Answer: Reduce perceived magnitude by expressing cost in a smaller, relatable unit

Breaking down an annual or monthly cost into a daily equivalent makes the price seem trivially small relative to familiar expenditures.