170px-Paget_holmesI just read a really interesting article on pricing and I would like to share it with you so that you can implement this into your own business.

I’ll Give It Five

OK pop-pickers this is a blast from the early days of TV – Juke Box Jury to be precise – and panelists had to judge new record releases and give them a score out of five.

I digress.

This all relates to the power of the number 9.

For a long time number nine in pricing has been the silver bullet to generating extra sales – 19.99 is a much better buy than 20.00, or so consumer buying habits tell us. But you would think that after all this time they would have twigged to this trick, wouldn’t you?

Not so, say researchers at Quantitive Marketing and Economics; 9 is still the magic number.

In fact it is so magical that it outperforms the number 5 in pricing! A recent study compared price points such as $34 and $39 on some items of clothing and found that the $39 price tag outsold the $34 ticket by 24%.

The number 5? Well in the same study and identical articles were sold thus: ‘Normally costs $70.00 now on sale for only $55.00’ and ‘Normally costs $70.00 now on sale for only $59.00’.

The result?

The $59.00 price tag consistently outsold the $55.00 offer.

In the same article the report discussed price points and how they can affect sales. In the case of beer (no, not actually a case of beer – never mind!) having a regular and premium brand resulted in the premium accounting for 80% of the sales with the regular lagging behind at 20%.

Adding a cheaper version of the beer shifted the purchasing decision dramatically; 80% of the buyers went for the middle-priced (previously regular) version with 20% opting for the premium. Nobody bought the ‘cheap’ version.

Finally the testers decided to test an ultra-premium version in the mix. They offered the regular version at $1.80, the premium version at $2.50 and the ultra-premium at $3.40. Results were astonishing:  5% bought the regular drink, 85% the premium and 10% the ultra-premium. The message is simple; avoid introducing too many low price points focus on providing a premium experience for your customers; they will be happy to pay for it.

And finally, which is the more expensive ?

• $1,499.00

• $1,499

• $1499

Even though they are all the same, in tests, those surveyed felt that the top two were much higher priced than the third.

The takeaway? Avoid fancy pricing; the no frills $1499 with no zeros and commas is much less a barrier to purchase than the $1,499.00 product.