Now, you’ve probably heard of today’s pricing hack and maybe you’ve already decided it’s not for you.
Before you write it off completely, though, let’s look a little deeper into the mysterious world of charm pricing.
This is a term for setting prices that end in 9, 95 or 99. You’ve probably noticed that the prices in some stores are always $9.99 or $24.95 rather than $10 or $25.
Creative people sometimes roll their eyes at this strategy, partly because they associate it with low-end retailers, fast food joints and discounted merchandise, and partly because it can seem pretty old-fashioned.
And that’s fair enough. Charm pricing definitely does have those connotations, and it may not feel like a particularly good match for a high-value brand.
But here’s the thing: it works.
Not for every seller or product, it must be said, but sometimes a clear effect can be identified.
The online payment processor Gumroad, for instance, has found that prices which end in 9, and which are on the border between one dollar amount and the next, have a higher conversion rate than prices which are one cent higher.
It found, for example, that items priced at $1.99 had a conversion rate of 5.2%, while items priced at $2 had a conversion rate of 2.39%. It may not sound like it, but that’s a huge difference.
Merchants around the world, in wildly different industries, have discovered exactly the same thing.
Well, the answer seems to lie not with the 9 at all, but with the left-most digit.
In the case of $1.99, it’s the 1 that casts the spell.
Researchers have discovered that we absorb numbers incredibly quickly – much faster than we’re aware. It seems that our brains use the first digit to anchor the overall price, and it happens the instant our eyes land on that number.
So $1.99 is anchored as a “one-ish” sort of price, while $2 is anchored as “two-ish.”
This explains why the effect doesn’t occur when a price ends in a 9 but it isn’t on a border. The difference between $4.29 and $4.30 doesn’t register, but the difference between $4.99 and $5 definitely does.
So should you use charm pricing?
It depends. As we’ve said, many high-end merchants deliberately steer away from pricing that ends in 9, believing that it diminishes their brand and encourages price sensitivity.
Whole numbers are often seen as more elegant and high-value.
Even if you feel that way too, I still think it’s worth knowing about charm pricing. You may not use it very often, but if you choose to run the occasional sale it could come in handy.
Also, charm pricing opens the door to a whole world of pricing nerdery. If you want to geek out on this stuff there are lots of ideas to try. I’ll list a few in just a sec, but before I do, let’s briefly come back to the idea that whole numbers are classier.
If you think about it, that’s pretty weird. Where could a thought like that be coming from?
Well, it’s caused by something called processing fluency, which is the ease and speed with which we absorb information.
Read these names out loud for me, would you?
Now, unless you already knew how to say them, or you’re a native Irish, Slovenian or Welsh speaker, I bet that took you a little longer than usual. For most native English speakers, a name like, say, Britney Spears is much more straightforward.
Your processing fluency for the first three names was probably mildly impaired – it took you longer, and you had to put in more effort, to understand the combination of unfamiliar letters and turn them into sounds.
Britney, on the other hand, may not have caused you any trouble at all.
This is processing fluency in action.
When we understand information quickly and easily it feels nice, and a little bit of that nice feeling spills over into whatever we’re thinking about.
In pricing terms, it takes less effort to understand $50 than it does for $31.26. Rounded prices are therefore processed more fluently and quickly, and that leads to a pleasant feeling of them being somehow “just right.”
This effect is enhanced when the purchase is emotionally driven – such as when people buy art. That “just right” feeling adds to the sense of completeness, longing, hope or pleasure that’s already flooding the customer’s mind. It also helps to explain why pricing in whole numbers sometimes feels like the more attractive option.
Best practices for playing with numbers and symbols:
The suggestions that follow spring from pricing research. If you’d like to try them out, do so cautiously. Pick a few that seem helpful, and which you can easily implement, give them a go and keep an eye on the results.
Also remember that these are micro tweaks. They’re lab-tested but not in your specific situation. If your overall pricing structure or value markers are out of whack, they can’t fix everything for you. Think of them as interesting seasonings rather than the main course.
Some ideas to try:
– Take out the comma and the double zeroes in your prices. Instead of $1,299.00 make it $1299. This reduces the space taken up by the price on the page, and it’s phonetically shorter. Even though people don’t say prices out loud, studies have shown that we perceive prices to be smaller when they contain fewer syllables.
– Show prices in a smaller (but still clearly readable) font size. As before, our brains equate small visual magnitude with small numerical magnitude. If you do have cents or pennies in your prices, you can put them in super text, above the dollar figure.
– On your website or in your catalogue, show the product, then the price. By making sure the customer sees your lovely thing first, you’re gently implying that its value and quality are the most important considerations.
– Don’t use currency symbols any more than you have to. If it’s very clear which currency you operate in, and if buyers are expecting to see a price in that context, you may not need to show it at all – just the numbers will do.
help with wholesale
If you've liked what I've had to say,
get more with my newsletter.
Six free Beginner's Guides, weekly wholesale tips and the occasional
offer to help you sell the lovely thing you make to shops.