The psychology of the price. what they see and what it is

[Shepherd]

Been really thinking about this lately and it's been fun to think about.

So... A product sells on our site for $1.97.
9 out of 10 times when a visitor/customer mentions the price they say it is $1.95.

Thinking about changing the price to $1.95 since that seems to be what people's brains are seeing. Could the $1.97 price be hurting conversions because subconsciously people are struggling with actual vs perceived price?

[Essex_boy]

Yeah its a weird price, imo, change it to $1.95. I once had a desk for sale for months, increased price by £200 and I had 3 people after it the following weekend, similar situ with rings - Couldn't sell them so bought ring boxes that were hand made, leather and satin hand stitched.

Tripled the price of the ring and they all sold out within a week, people prescriptions are odd.

[Travis]

Yeah, $1.97 is odd price, it sounds like you are insanely increasing your profits by 2 cts, at the expense of the buyer :) while at $1.99 it sounds like you are giving away 1 cts from your margin to the benefit of the buyer :)

[NickMNS]

@shepperd

9 out of 10 times when a visitor/customer mentions the price they say it is $1.95.

That is why one sets the price at some value less than the "natural" price. People perceive a price as being much less if it is $1.99 as opposed to $2 despite the fact that is nearly the same. Your users are are perceiving the price as $1.95 when it really is $1.97. So the user basis his or her buying decision on $1.95 and you get an extra 2 pennies or a 1% margin. Your competitor is probably selling the product at $1.99, making your product "much cheaper" as perceived by the user. Why change it, sales wont improve, you will simply earn less.

[Shepherd]

I'm going to do an A/B test to see how it conversion rate. I don't think it will matter much, agree with NickMNS.

It's just something I've observed over the years and got to thinking about lately. The brain can be a funny thing. If seeing and perceiving are in conflict there could be a subconscious battle waging and effecting conversion: why did you not buy? Don't know, just didn't feel right.

[tangor]

This kind of pricing has been around since the 1920s .... there's not a lot of testing left to do. Consumers see 1.99 as less than 2, even if you only put 2 with no zeros. Go figure.

As for 1.97 being seen as 1.95 there's no fixing user blindness.

[lucy24]

My first thought was that they’re Canadian and are used to rounding to the nearest nickel. But if you’re based in the US, I guess that explanation won’t work.

[Shepherd]

I did not know that about Canada Lucy. Yes, almost all customers in the U.S.

User blindness, I get that for sure. We have to waste so much space with the most ridiculous notices. This is RED. *It is NOT blue *It is NOT YELLOW *It is NOT a puppy...

[keyplyr]

This kind of pricing has been around since the 1920s

You have a good memory.

[NickMNS]

The Canadian Government discontinued the use of pennies a few years back. But that is only relevant when transacting in cash (or coins). 1 cent increments are still used for all other forms of transactions (eg: credit or debit cards)

[makeonlineshop]

It should be 1.99 !
Because it looks like you tried as much as possible to sell it less than $2 !
You are a kind seller : -)
I never believed the BS about prices ending by 7.

[tangor]

You have a good memory.

And don't let me forget it!

Having access to sales and marketing analysis tests and reports conducted over the years helps. Even the web has this kind of info.

In the days of hard currency it was the act of the seller (or resturanteur) givings CHANGE BACK which was key. These days of electronic payments it makes no difference, but culturally, this "less than whole number" still has a psychological meaning.

[Travis]

People are not rational :)

As I said, 1.97 sounds like the real price was 1.95, and you increased it by 2 cts, while 1.99 sounds like the real price was 2.00 and you are giving a discount :) No matter what the real price is.

[Shepherd]

I never believed the BS about prices ending by 7.

we did test, about 10 years ago, and $xx.x7 always had a better conversion rate than $xx.x9

It's funny, when we started the adding the cents on the price it was really only for our internal use, a quick way to differentiate between departments/services/products. We could sort in Lotus 123 easier than we could build hardware and massive databases.

[Shepherd]

1.95, and you increased it by 2 cts

It does seem to be what the perception is, even if it is probably just subconsciously.

[lucy24]

Come to think of it ...

A few months back,* when I balanced my checking account I was off by two cents. (This is, as we all know, much more troublesome than being off by $2, let alone $200.) After poring over the details, it turned out I’d recorded one automatic debit as $19.95 when in fact it was $19.97. Perhaps a lifetime of prices ending in either 5 or 9 makes the brain unable to assimilate prices ending in anything else.


* Before posting, I looked it up to make sure I hadn’t remembered it backward, which would have blown the point. Turns out it was not a few months but almost two years ago. Oops.

[Shepherd]

recorded one automatic debit as $19.95 when in fact it was $19.97

That could not be any closer to exactly what I'm seeing Lucy, too funny.

So I still wonder, is this .97 pricing creating a subconscious conflict in the brain. Started .95 test today, so far conversion rate is lower than normal. Waaaay too early to glean anything from that though.

[Shepherd]

day 1 of .95 conversion rate test: CR 22.67% Lower than previous 7 day average.

[RhinoFish]

How big is dataset (aka, how many conversions)?

[Shepherd]

Daily data-set, overall visitors in the 8xxx range, order page in the 2xxx, orders in the 1xx range.

Unfortunately, I have discontinued the test, conversion rate kept declining to uncomfortable levels. Since changing back to $xx.97 price conversion rate is starting to climb back up.

[Travis]

proof is there is no logic in people's mind.