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Odd or even pricing, does it make a difference?

$10 or $9.99?

     
9:21 am on Apr 5, 2006 (gmt 0)

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I currently use whole number pricing on my web site.

There is a lot of theory on the web regarding this issue. I've read things like, "use the number 7 when listing prices," like $297 instead of $300, and use fractions, like $19.95 as opposed to $20. Are consumers mentally conditioned to respond better to odd pricing?

Questions:

1. Does it really makes a difference on conversion rates if you list a price as $10 or $9.99?

2. Does anyone have any practical/real world evidence that this kind of practice works?

6:00 pm on Apr 5, 2006 (gmt 0)

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Reducing a price by a penny or more under the even dollar amount has long been accepted as a tactic for increasing sales. But I have seen evidence in the past year or so that this strategy may not be true anymore.

The two largest grocery/department store chains in town now regularly run specials with prices in even dollars.

It could be that people are jaded to the old tried and true strategy and retail establishments are catching on.

As an additional observation -- these stores also regularly run specials with pricing on multiple items. "10 for $10" is a regular special pricing at one store. "3 for $5" and "6 for $10" is also used quite often.

I think the bottom line is to test your pricing. What works for one business may not work for you. And do test *raising* the price as well as lowering. Sometimes raising the price actually sells more!

6:38 pm on Apr 5, 2006 (gmt 0)

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The reason it works (as a former psych student and current ecommerce retailer) is that people can't help but read something that is written if they are looking at it (just try and look at a sign and not read it- impossible, unless it isn't in your language), and when they read it, in their head the number comes out as it is, not rounded up.

So, for example, if you see 9.95, the voice in your head says nine ninety five, which starts with nine. Even if you round it to ten in your head immediately after, the initial impression is nine. In other words, the nine is automatic, and the first price everyone gets. That some people round up in their heads requires conscious effort, and isn't ever the first impression, or the automatic one.

Tons of research back up the reality of this pricing scheme being advantageous to sellers. Now, it may not be prevalent in some places, but that doesn't mean the principle doesn't hold true there as well, just that the custom of whole pricing trumps the psychological advantage of slightly rounding down to appear significantly cheaper.

7:43 pm on Apr 5, 2006 (gmt 0)

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I like that explanation.

None of us would ever admit that we are "fooled" by niney pricing. I know that 9.99 is almost 10. Yet a tiny statistical part of me is more likely to make an impulse purchase for a 9.99 item.

The 9 makes an immediate nineish impression somewhere deep in my reptilian brain. Someone should do a study on whether reptiles and amphibians are susceptible to the same tricks. :)

9:34 pm on Apr 5, 2006 (gmt 0)

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why not just tell it like it is. List the price without trying to manipulate the buyer into a .99 looking lower for some reason. I myself am often refreshed when I see things listed in all their transparency without the "buy now" overtones, implied in the .99 pricing but which is so common now that it has become the norm. The small hard sell tactics including lowball pricing, shipping today when ordered by 3 EST etc., have become mildly annoying and you can go the other direction and tap into the growing market segment who is yearning for above board in advertising even if it does not sound as good on paper.
10:15 pm on Apr 5, 2006 (gmt 0)

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To sum it all up, as H. L. Mencken said in the Chicago Tribune on September 19, 1926:

"No one in this world, so far as I know ... has ever lost money by underestimating the intelligence of the great masses of the plain people."

12:45 am on Apr 6, 2006 (gmt 0)

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<I also think it's way more important when you are talking hundreds as if its $299 - they think 200 rather than 300>

That's really true with higher dollar values. When I see $999, I normally just round down to $0 instead of up to $1000, so it feels like I'm getting everything for free.

1:53 am on Apr 6, 2006 (gmt 0)

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Just an FYI

Big stores like Best Buy and Sears use different endings as codes for different products at different stages in there lifespan or for sales etc. For example, a price ending in a .97 would indicate a closeout item or .98 would mean discontinued, etc. I'm sure a quick search would turn up the codes.

As for pricing things at a fraction below a whole dollar amount, obviously it converts better for a vast majority of shoppers. Gasoline is actually $2.59.995 or really $2.60. Of course, there will be a few who find it shady and see right through it, but you need to sell to the majority.

Also, I totally agree that making the price look "slashed" does help conversions, especially on impulse type items or items that don't involve alot of apple to apple comparisons. I think it makes the buyer feel as though they have stumbled onto a pretty good deal and they don't want it to slip away.

There was a study recently that showed that people who shop at Sams Club, Costco, etc actually spend more money than they originaly planned because of the percieved bargains. Most buyers just can't let a good deal slip away even if it exceeds their original spending budget.

2:01 am on Apr 6, 2006 (gmt 0)

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I myself am often refreshed when I see things listed in all their transparency

I am too! I used to think that lots of other people felt the same way, too, and that they would flock to me for being honest. I remember being baffled as a fresh-faced 18 year old kid working the counter for the first time, unable to figure out why people who have been buying things since before I was born don't respond to honesty, yet not only respond to the snakish tricks like 9.99 instead of $10 but DEMAND THEM when you try to play it straight.

After 21 years serving the public, I am no longer surprised but still every bit as baffled as to why even seemingly intelligent people can be so easily manipulated. Longtime clients who gush praises for my skill, experience, and craftsmanship will nonetheless get reeled into the most snakish competitors establishment by some cheap come-on then get taken to the cleaners with add-ons and scare tactics, and never bat an eye. One of the reasons I have stuck with the thankless career of fixing machines is because PEOPLE drive me so crazy!

Many people verbally claim to dislike $9.99 style pricing, but given a choice their action is to go for it virtually every time.
-Automan

5:13 am on Apr 6, 2006 (gmt 0)

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That's really true with higher dollar values. When I see $999, I normally just round down to $0 instead of up to $1000, so it feels like I'm getting everything for free.

lol, thanks for that.

When I look at prices I sub consciously round up to the nearest dollar. Sometimes I even round higher for good measure without realizing it.

I think it's true that the 9.95 tactic works on the masses. But consider your market first. If you try to sell me something for 9.95 my response is that you're attempting to insult my intelligence, and possibly your own as well.

There's a reason Wal-Mart is the king of unusual fraction pricing... Look at their target market.

If you're targeting smart people, be honest. If not, have fun with fractions.

5:38 am on Apr 6, 2006 (gmt 0)

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Part of the problem is that if you delve into really trying with the .99 issue, which can be seen as manipulative but not really dishonest, it does not usually stop there. Many people move onto brighter things in this arena such as 'regular price $599.00/ sale price $299.00' when there is in fact no sale but they are just making up the regular price off their head to make it look like a discount. You can get away with it for awhile but like any sort of dishonesty it will catch up with you eventually depending upon how far you take it.
7:40 pm on Apr 6, 2006 (gmt 0)

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I know this is a common practice but I've got to tell you I've become so cynical and annoyed by corporate spin and car commercials that say you can buy a car for "under 10,000 (read $9,999.99) that I find it very refreshing when I see people just call it what it is. In fact, I with some intrpspection I believe its fair to say I actually assign more creditibility and good will to companies that don't play that game now.

I may not be in the majority, but I would suspect that a small but growing number of jaded consumers will join my ranks in the coming years.

5:39 am on Apr 7, 2006 (gmt 0)

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As for my 1.9 cents worth...

I agree with cabbagehead. While working on my MBA 20 something years ago, it was a theory develop by a famous marketing consultant to price products .99 instead of $1.00. This may have worked on the 1940's consumer, but today consumers may be ignorant of many things...however this merchandising tactic is quite evident to them.

Actually, we have had much more success pricing items with round figures. ie...$10.00, nice clean and simple instead of $9.99...the consumer still knows it is really $10 and you are insulting their intelligence.

12:56 pm on Apr 7, 2006 (gmt 0)

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"As for my 1.9 cents worth..."

Funny!

1:13 pm on Apr 7, 2006 (gmt 0)

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We don't bother any more. We just put the price up and forget it. In fact a lot of our retail prices any more we just generate in Excel (cost x markup + any adders or subtractors = price on the website).

Does not seem to have affected a thing that what we used to sell for 9.98 now sells for 10.02.

5:22 am on Apr 9, 2006 (gmt 0)

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I think that will work well simply because all your prices will be all over the place, (like 39.63, 52.92) indicating pricing based on real cost+%. Put them all at xx.02 though and you may find a different result.

On the other hand, you are making the customer think more, processing all the varying numbers, which has a negative affect on sales.

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