$39 can be cheaper than $34
We are familiar with the concept of products priced at, say, $39 selling better than the same product sold for $40. We are all familiar with the number ‘9’ used to create the illusion that $39 is much cheaper than $40 (despite the paltry 0.025% reduction in the price) – but we respond to it.
William Poundstone found that a product will consistently sell better at $39 than at $40. In one study, Poundstone compared - $39, $34, and $40 and found that $39 generated the highest level of sales – even more than $34. It seems that ‘9’ impacts perception – even when it is not at the lowest price.
In another study, researchers compared two offers - ‘was $48 – now $40’ with ‘$39’ and found that the former generated more sales - suggesting that price comparison or providing context – is even more powerful than the number ‘9’ effect. That said, when ‘was $48 – now $40’ was compared with ‘was $47 – now $39’, the latter proved more effective.
Another study considered the impact of ‘0’ and found that consumers often view prices ending in a zero (say $40) are viewed as ‘rounded prices’ and as such as being ‘artificially higher’ – as if plucked out of mid-air. Yet another study looked at the impact of ‘cents’ being included in the price and found that - $17.00 generates more sales than $17.12 with ‘emotional purchases and $17.12 generates more sales than $17.00 with ‘rational purchases.
Yet another study found that consumers will perceive a price with less syllables to be lower than one with more syllables. For example - $27.82 (7 syllables) generated more sales than $28.16 (5 syllables). Framing the price has also been found by research to impact the perception of a price, with $22 plus $3.99 shipping and handling seen as cheaper than $25.00; ‘5 easy payments of $99’ seen as cheaper than ‘$495.00’ and ‘$0.49 /day’ is seen as cheaper than ‘$14.99’ per month.
Another study found that a price in the bottom left of a price ticket is seen as cheaper than the same price in the top right of that same ticket; a price in a large font is seen as more expensive than the same price in a small font and a price with a comma ($2,400) is seen as more expensive than the same price without a comma ($2400).
These and many other equally counter-intuitive research findings highlight the finding by many behavioural economists and psychologists that purchase behaviour is rarely rational when it comes to price. Pricing, especially determining the optimal price that maximises margin and volume, is complex. The best approach will depend on a range of factors, including the product, the market, the environment, consumer experience, your credibility, the importance of the purchase and the emotional content.
Identifying the optimal price is difficult. It is also essential if margins and profits are to be maximised. It is important to consider the science to determine the price that will maximise margins and unit sales.
D. John Carlson – Marketing Consultant Perth.
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