There’s a lot of different theories about pricing, and I have even run a whole course on this topic (How to Raise Your Prices, Charge What You’re Worth and Get It!). It raised its head again the other day in a meeting with some colleagues when we were discussing the price point of a new app being developed for the Joyful Parents website with which I am involved. Someone mentioned the power of different numbers.
“Why does everything seem to end in a 9?” she asked.
Good question, seeing as everywhere you look you see prices of £3.99, £1.99, £24.99 and so on.
In William Poundstone’s book ‘Priceless’ he dissected 8 different studies on the use of what are called ‘charm prices’ – those that are just a little below a round number. There are all sorts of different theories as to why these started to be used, but these studies found that on average, sales increased by 24% when charm prices were used, compared with their nearby ‘rounded’ price points.
In an experiment done by MIT and the University of Chicago, a standard piece of women’s clothing was charged at the prices of $34, $39 and $44. The item that sold best was, perhaps surprisingly, the middle one – $39. This doesn’t seem to make sense, why would buyers not plump for the cheapest price? Perhaps the number 9 really is magical.
Further investigation showed however that if you include in the label the original price and then a sale price, as in Regular Price: $48, Sale Price $40, as compared to simply showing $39, then the Sale price of $40 wins out.
But – the price ending in 9 still comes out on top when used in cohesion with a sales price, for example when you combine the Regular Price with the Sales Price, which ends with a 9, they register the most sales.
It seems that even given a less expensive option, buyers will be swayed by the apparent power of 9.
In our meeting, a couple of us knew about the above study. However, being good ‘Findhornians’ we decided to attune to the price (a method used to make many decisions at the Findhorn Foundation). In an ideal scenario all of us would attune to the same price. In fact, we all attuned to a different one, and then took the average. It didn’t end in a 9. What will we do? The decision was put to next week’s meeting, as I wanted to do some research about this number 9 (visit JoyfulParents.co.uk if you want to find out what happened!).
The real question is – now that you know this information, will you use it? Does a 1p difference really matter? In high volume sales it certainly does matter to the business; in low volume probably not.
Notice how you personally react to the difference between, say, £24.99 and £25. You may round the first number up in your head, but the initial impact still has an effect. Even if you consciously chose to pay the extra one penny, donating it to a charity box or whatever, the item or service would still have cost you £25.
So it’s not the cost that matters so much, as the number of people attracted to buying in the first place.
On the other hand, does this seem just too manipulative? Or are we all affected by numbers more than we realize? A read of ‘Priceless’ will demonstrate this to be alarmingly true.
There are plenty of ways to determine price; I have taught many of them. Perhaps the most important for you is finding a way, based on knowledge like the above, that then resonates with your heart as well as being informed by statistics. For without that energetic impact, you will simply not feel right about it.
This doesn’t mean to say that you shouldn’t stretch yourself (as many people tend to underprice their services or products) but that you stay true to your own integrity regarding this. Check out your own prices now and see how you feel about them.