The Psychology of Pricing: Customers Prefer Round Numbers

Our software gives you many choices on what sort of pricing you use. One choice you have is whether to make the price a retail price of say $2.80, $2.80, $3, $2.99 or $2.75, etc. Now what should you do?

Today most in retail would say that prices should end in "9." This is because they say the consumers puts most emphasis on the first number, so even though $2.99 is closer to $3, it's the "2" that registers and also that consumers today are programmed to think that prices ending in ".99" are a bargain. And indeed some experiments show consumers like prices that end in "9," increases sales.

There are some that disagree, and I blogged early of these people. In their view prices that take longer to say seems more to consumers, for example, 99 cents takes longer to say then 1. As such 99 cents seems bigger than one. The same effect is $4,999.99 then 5000. The dollar sign, commas and cents all add to the length. This is because as we read the price, we pronounce it in our brain. You can read about it here.

However, there is a new twist with a study that found that like everything the situation is more complex then this. They feel if something costs $3 people tend to rely on their feelings, whereas when something is complicated like $2.87, the shopper has to use reason to determine if it's a good price.

As a rule, they found recreational or luxurious benefit items like champagne did better with rounded prices while utilitarian objects like a calculator did better as a non-rounded price.

I know I think if I see a range of products with prices like $2.79, $6.84, $3.27, etc. that the merchant is being honest with his margins.

Anyway have a read here and then decide what you want to do, after all our software gives you the choice so you can take benefit of it.

If you want to investigate it still further click here.