Psychological Pricing

[Bronze]

Just out of interest how do you guys price your goods?

Do you use the classic decimal .99 or do you just leave at .00

I've seen conflicting reports on which method is best. Some say the classic .99 and other penny decimals psychologically trick the buyer into thinking that they're getting something for cheaper. Then some reports say consumers prefer seeing the straight cost for example 100.00

I've seen increasingly random decimals being used for example .39 and .47 in many shops.

When I'm shopping, if I see something ending with the decimal .99 I always round up to the nearest pound anyway so it makes no difference.

What are your thoughts?

 

[makemoney]

[FONT=&quot]Some counties have rounding, because their smallest coin is 5c or 2c. They can still legally mark stock as $2.99 knowing that the customer will not get change from $3; unless you buy 3/4 items ($11.96) then you get 5c change. Example stock marked at $3.02c is still $3.00. If this is done in other counties (taking a penny off a pound) and it works, then why not here in the UK,[/FONT]

 

In tests done by George our local market green grocer .97 wins everytime.

Earl

 

[Rhys Jones]

I prefer .95

I'm not sure why, i just think it seams to work better!

 

[cjd]

It depends what you're selling and who you're selling too. If you're selling cheap tat to idiots, £2.97 probably works.

(i don't believe that the estate agent 'trick' of £299,995 works on anyone but themselves.)

 

[josor]

I do the pricing to end it 4.99 or 9.99 above £20, below that I set to be 12.99, 7.99 etc

 

[Nuno]

I remember reading somewhere that sibilants tested well in pricing, which would give us the xx.97 prices, and there is some research that sibilants generally are more used in positive, affirmative words than in negative ones.
Don't have references to hand, sorry.

 

[kulture]

It works. When I sell an item for $49.99 on Amazon.com I get 5 orders a day. If I put it up to $50 I get one order a day. If I put the extra cent on the postage I still get 5 orders a day. Stupid.

 

[Hertford Bob]

When looking in to his I read somewhere that numbers with a hole in them i.e. 4 6 8 9 0 appear psychologicaly bigger than numbers without, so a price like 777.77 looks smaller than 666.66 at first glance. George the green grocers study backs this up so it must be true.

 

[Fred_the_frog]

If its a small cost, and i'm looking quickly then I usually by something that is '3.99' than '4.00', because I just look at the first number for quickness. Higher costs I tend to think about more, so I realise that It's only 1p cheaper.

Its just annoying because I end up with lots of 1p's and 2p's from where I only buy one .99 thing.

Hmm...

 

[ITsoldUK]

.99 or .98 seem to be popular and kick in the inbred feeling that something is being saved.

These have indeed been proved to work best for retailers.

Nice article on wiki here => http://en.wikipedia.org/wiki/Psychological_pricing

 

[cjd]

These have indeed been proved to work best for retailers.

Can you point me at the evidence for that (it's not in the wiki)

This is something that you could prove to yourself one way or the other by doing split testing.

 

[ITsoldUK]

Can you point me at the evidence for that (it's not in the wiki)

No worries, here are some stats from the page that were gleamed from a report in 1997

And I fully agree, split testing is THE way to go, not just on price but a whole plethora of marketing research.

According to a 1997 study published in the Marketing Bulletin, approximately 60% of prices in advertising material ended in the digit 9, 30% ended in the digit 5, 7% ended in the digit 0 and the remaining seven digits combined accounted for only slightly over 3% of prices evaluated

 

[cjd]

No worries, here are some stats from the page that were gleamed from a report in 1997

Yes I read that but not much of it is about whether psychological pricing works, just that a lot of companies/people do it.

I was hoping you had some evidence that is sells more stuff and if it does, what kinds of products it works/doesn't work with.

 

[ITsoldUK]

Yes I read that but none of it is about whether psychological pricing works, just that a lot of companies/people do it.

I was hoping you had some evidence that is sells more stuff and if it does, what kinds of products it works/doesn't work with.

Ahh, for that info please visit....kidding

My interpretation was that if so many were doing it, then there must be some kind of result in the positive...

But then again, my glass is always half full

 

[cjd]

My interpretation was that if so many were doing it, then there must be some kind of result in the positive...

And if everybody is thinking that.......

It's a certainty that if it works it will only be in some situations whilst in others it will have the opposite effect; it's important to know which you have.

 

[fisicx]

Took me a while to find but here it is: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=172721

Take a look at Wallmart (especially) and most of the UK supermarkets. You won't find many £0.99 - is all 0.98, 0.97 and other versions.

 

[Hertford Bob]

One theory I remember about the whole .99 thing is that it was originally introduced to keep cashiers honest, if the prices are £10, they could take the note without ringing it in. The fact that they have to give change from any notes tendered forces them to ring the sale in and makes it harder for them to steal.

 

[cjd]

Took me a while to find but here it is: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=172721

So Steve did two proper split tests and found that in one there was no difference between selling something at £3 and £2.95 but £3 won over £2.99 by
33%.

In his second test he did £169 and £170 and found that £170 made 40% more clicks.

So the .99p test fails on those two products at least. I suspect that it normally fails but everyone has got used to it.

 

[mit74]

i also remember reading a few months back that pricing things .99 or .95 etc helps the economy. Not sure if that's true or not. I can't remember where I read it.

 

Quote:

"This may help explain the reasoning behind the #7

This is a quick but very important principle.

Tests have proven, particularly those carried out by Ted Nicholas (the great US copywriter), that when you price a product or service ending in 7 you'll get more sales...
Yes I know this sounds crazy but you'll be surprised at the effect this one simple change can have on your client's sales and profits.

There is logic behind these findings…

For years many people have used the principle of '9' to make the price seem less…
99p is just 1p less than £1 but people don't see it as £1. Similar cases are made for £9.99, £99.99, £999.99, etc. So, psychologically, you know that pricing in this way does help.

But what researchers like Ted have found is that '7' works better than '9'.

·Instead of 99p, change to 97p

·Instead of £9.99, change to £9.97

·Instead of £999.99, change to £999.97 or £997

·Instead of £9,999, change to £9997, etc. "

Earl

 

[mit74]

you also have to look at it like this: if you have 2 identical products but different name on the shelf one marked £2.00 one marked £1.99. Which one will sell the most?

I'll bet the £1.99 will sell considerably more. Pricing them £1.99p and £1.98 isn't going to make as big a difference. On its own the 1p is irrelevant but next to the competition are you going to risk pricing it at £2 and losing sales because of it?

 

[Banned]

We have very recently changed pricing to end in a full pound rather than 95p. Customers love and comment on it and sales have increased. The comments are generally that they appreciate not being taken for a fool.

And I make an extra 5p per sale

 

[makemoney]

This thread seems to favor 97p. Does this mean all those £1 shops that are becoming 99p shops should be 97p shops?

 

[mdjo]

Interesting article here about this subject. http://www.scientificamerican.com/article.cfm?id=why-things-cost-1995&ec=su_1995
Their research suggests it's about the precision of the number £0.98, £0.99 etc vs a round number £1, and the yardstick this sets up in the brain. Doesn't go into specifics about the difference between £0.97 vs say, £0.99 -

 

[cjd]

"This may help explain the reasoning behind the #7
Earl

Can you show us some evidence that #7 does better than anything else?

 

[WJP]

*Subscribes*

 

[Esk247]

basically nobody actually knows.

99p shops managed to out perform £1 shops somewhere, at some place, i remember it being referenced on here.

we've always used .95 or .99

 

[cjd]

we've always used .95 or .99

Why have you always used .95 and .99?

 

[Esk247]

Why have you always used .95 and .99?

because its most recognisable amongst pricing in retail outlets, from what i've seen so far.

laptop 399.99 or 399.95

if you visit the ebuyer homepage you only see one price for .98 the rest are .99

 

[cjd]

because its most recognisable amongst pricing in retail outlets, from what i've seen so far.

laptop 399.99 or 399.95

if you visit the ebuyer homepage you only see one price for .98 the rest are .99

That's evidence that people do it, I want evidence that it makes a difference.

 

[Esk247]

That's evidence that people do it, I want evidence that it makes a difference.

well then you're looking for a golden egg, i can't find any conclusive proof. i'm not looking at 'reports' or 'he said she said' im looking at the big retailers.

Asda seem to do .97 a lot on certain products but tesco are pretty random, .98 .99 .97 .95

which either points to no conclusive proof or they know something we dont and one of those .9??? something converts better for products they want to shift.

 

[cjd]

So, once again, they all do it.

But the only actual evidence we've seen so far is that it doesn't work and could cost you profit.

Go figure.

 

Can you show us some evidence that #7 does better than anything else?

Teds take on it:

http://secrets-to-your-successful.com/Ted2.htm

Earl

 

[cjd]

Teds take on it:

http://secrets-to-your-successful.com/Ted2.htm

Earl

Tell me that was a joke. Please.

 

[Banned]

Why all the talk about supermarkets?

Selling a can of beans at 37p, 38p, 39p isn't really the same as selling an item for £238.98 or £239

Maybe the supermarkets are just working on the margins which dictate if the price ends in 9p or 7p as long as it's over 5p. Now have a look at Tesco's bigger ticket items and whilst a few end in odd pence, the vast majority end in round pounds http://direct.tesco.com/q/buylist/Ntt.5745/N.308.aspx

To many guru's and pseudo-experts being paid to come up with facts and shopping habits that aren't really there, as this thread is proving.

 

[Steve Sellers]

By giving it a random number is it not a case of making it look as though some thought and science has gone into the price. For example I sell services on a fixed quote basis. I never just say for example £500 as it looks as though I plucked the number out of the air. SO I go for £515, £525 etc.

 

Tell me that was a joke. Please.

Not to Ted it ain't.

Earl

 

[ToolSeller]

In our shop we price at uhm...prices such as .23 or .48 (i.e. non round numbers) and we found that customers ask for less discount on these items than those with numbers such as .95 or .00.

A customer once commented that when you use a price that isn't a round number it appears that the item has been discounted to the best possible price. Possibly due to other retailers having round numbers!

That possibly made no sense

 

[DDPlumbing]

Some large retailers use the decimal point price to give info to their sales staff.

ie. *.97 means its a sale item and cant be offered discount.

*.48 is end of line and can be discounted heavily

*.99 is new stock and cant be discounted etc.

I believe comet/pc world still use this,

Some supermarkets use it to age mark stock too.