Smarter Pricing: How to capture more value in your market

Ten dollar bills feel more than $100 on the card

The research by Gourville and Soman (2002) also flagged up the link between payment methods and perceptions of cost. They discovered that consumption is driven more by perceptions of cost than actual paid-for cost. A cash transaction involves counting out the notes, handing them over, receiving and counting the change. The more stages in the transaction the greater the impression of magnitude. A credit card payment involves just a quick tap of a PIN. So a purchase with cash will feel more expensive than a purchase on the card. Moreover, buyers will remember the precise cost of a cash transaction far more often than they can remember the exact amount on the credit card slip. Thus the impression ...