| | Wow – this is a massive topic! So here is a quick overview of some of the key facts and the research around some of the current thinking around pricing and how it works with our brains! To find out more read the accompanying article below! |
There are also links to easily understood articles and documents around the studies mentioned – this is in preference to the full scholarly documents which are often hundreds of pages long – but you can find on Google if required.
The Magic Number
Also known as ‘Charm Pricing’ is all about the use of the number 9. Essentially this is the theory that people prefer numbers that end with a 9 when making a purchase. This has been most widely reported in an MIT study which showed that the same dress on sale for $34, $39 and $44 sold the most at the $39 price point! The same dress, in the same store, in the same position. Thinking about this yourself you can see how a price point of £39 keeps in in the £30 bracket rather than the £40 bracket – but this study proved that the retail could actually get an additional $5 for the product just by upping the price and using a 9!
There is some great analysis of the various studies by William Poundstone in his book ‘Priceless’. You can find his book HERE and the info on the MIT study around pricing HERE.
Round Numbers
This is the theory that if you are making an emotional purchase then you are better using a rounded price, but for a ‘rational’ purchase decimalised numbers work best. This is because when people are buying with their heart we do not want to interrupt that emotional, heart led approach by getting them to think about numbers! When people are making rational decisions this is all Ok however – they are engaging their brain anyhow!
This is based on research by the Journal of Customer Research and a great summary can be found HERE.
We also touched on using straight numbers (e.g. 1499) as oppose to fuller representations (e.g. £1,499.00). Even looking at the numbers written down you can see the difference – they are shorter and therefore ‘look’ like less – it’s the same if you say it out loud!
This is based on research form Coulter, Choi and Monroe and a brief summary can be found HERE.
Equivalence Pricing
Taking the idea that a large figure can be explained and shown to offer great value by breaking down the figure and making direct comparisons to everyday products / services that the prospect is familiar with. For example if you can get your product or service down to a daily cup of coffee it looks far more appealing than the ‘full’ price, and in fact this approach can be seen in use currently by a number of big advertisers.
This is based upon a study by Gourville back in 1998 and can be found HERE.
Anchoring
This is based upon the temporary effect of a higher number on our perception of price. It can also refer to comparisons with similar products at a higher price. So if we say ‘the PC1000’ followed by a price of £899, we have a temporary blip in perception that makes us perceive it as a lower figure than it actually is. Beware – its only temporary!!!
This is from Adval and Monroe 2002 – info HERE.
Rule of 100
How to show a reduction or a discount – if it’s under £100 then show it as a %, if its over £100, show it as a cash value… and give a reason for the reduction e.g. ‘clearance’ or ‘end of season’ – just using the term discount is seen as a negative. Its understandable why – its all about which gives the biggest number as the reduction, regardless of if it’s a % of a £ figure!
Info on this study by Mazumdar Raj and Sinha is HERE.
Phew – so these headlines should give you a few key facts to think about – can you get a little extra out of your sales price by taking it up to a 9? Rename a product to your advantage? Or just change the way you are talking about numbers! I’d love to hear how you get on – tweet me at @BuzztasticLtd !
The Magic Number
Also known as ‘Charm Pricing’ is all about the use of the number 9. Essentially this is the theory that people prefer numbers that end with a 9 when making a purchase. This has been most widely reported in an MIT study which showed that the same dress on sale for $34, $39 and $44 sold the most at the $39 price point! The same dress, in the same store, in the same position. Thinking about this yourself you can see how a price point of £39 keeps in in the £30 bracket rather than the £40 bracket – but this study proved that the retail could actually get an additional $5 for the product just by upping the price and using a 9!
There is some great analysis of the various studies by William Poundstone in his book ‘Priceless’. You can find his book HERE and the info on the MIT study around pricing HERE.
Round Numbers
This is the theory that if you are making an emotional purchase then you are better using a rounded price, but for a ‘rational’ purchase decimalised numbers work best. This is because when people are buying with their heart we do not want to interrupt that emotional, heart led approach by getting them to think about numbers! When people are making rational decisions this is all Ok however – they are engaging their brain anyhow!
This is based on research by the Journal of Customer Research and a great summary can be found HERE.
We also touched on using straight numbers (e.g. 1499) as oppose to fuller representations (e.g. £1,499.00). Even looking at the numbers written down you can see the difference – they are shorter and therefore ‘look’ like less – it’s the same if you say it out loud!
This is based on research form Coulter, Choi and Monroe and a brief summary can be found HERE.
Equivalence Pricing
Taking the idea that a large figure can be explained and shown to offer great value by breaking down the figure and making direct comparisons to everyday products / services that the prospect is familiar with. For example if you can get your product or service down to a daily cup of coffee it looks far more appealing than the ‘full’ price, and in fact this approach can be seen in use currently by a number of big advertisers.
This is based upon a study by Gourville back in 1998 and can be found HERE.
Anchoring
This is based upon the temporary effect of a higher number on our perception of price. It can also refer to comparisons with similar products at a higher price. So if we say ‘the PC1000’ followed by a price of £899, we have a temporary blip in perception that makes us perceive it as a lower figure than it actually is. Beware – its only temporary!!!
This is from Adval and Monroe 2002 – info HERE.
Rule of 100
How to show a reduction or a discount – if it’s under £100 then show it as a %, if its over £100, show it as a cash value… and give a reason for the reduction e.g. ‘clearance’ or ‘end of season’ – just using the term discount is seen as a negative. Its understandable why – its all about which gives the biggest number as the reduction, regardless of if it’s a % of a £ figure!
Info on this study by Mazumdar Raj and Sinha is HERE.
Phew – so these headlines should give you a few key facts to think about – can you get a little extra out of your sales price by taking it up to a 9? Rename a product to your advantage? Or just change the way you are talking about numbers! I’d love to hear how you get on – tweet me at @BuzztasticLtd !
