CPM CPM Price Psychology & Behavioral Economics

Question 1

Charm pricing (e.g., $9.99 instead of $10.00) leverages which cognitive bias?

Accepted Answer

Left-digit anchoring

Answer

Consumers disproportionately encode the left-most digit of a price, making $9.99 feel significantly cheaper than $10.00.

Question 2

The decoy effect in pricing involves adding a third option primarily to:

Accepted Answer

Make the target option appear more attractive by comparison

Answer

An asymmetrically dominated decoy shifts preference toward the target option by making it look superior to the decoy.

Question 3

Prospect theory suggests buyers are more motivated by:

Accepted Answer

Avoiding losses than acquiring equivalent gains

Answer

Kahneman and Tversky showed that the pain of losing $100 is psychologically stronger than the pleasure of gaining $100.

Question 4

When a retailer sets a high 'original' price and then offers a discount, this exploits which pricing psychology principle?

Accepted Answer

Price anchoring

Answer

The high original price serves as an anchor, making the discounted price seem like a greater bargain than it may objectively be.

Question 5

Which framing approach typically generates higher willingness to pay for an upgrade?

Accepted Answer

'Upgrade for only $5/month more' vs. 'Upgrade costs $60/year'

Answer

Presenting the incremental cost in a smaller time unit (monthly) reduces perceived outlay versus the larger annual equivalent.

CPM - Certified Pricing Manager Practice Test