You have started a business, scouted your competition, and are now ready to price your products. Once done, you now simply add 99 to your price because the general wisdom is doing so will generate more sales… and you would be wrong! the current podcast episode explores new research and how to use it to your advantage.
I recently did a workshop on how the mind processes pricing and thought I would include a few features in the podcast, because in certain instances the mind does see 99 as cheaper, but not in all. New cognitive research indicates that some prices are more attractive because our brain is able to process them more simply and quicker.
Now, back to that 99 cents. Yes, the brain sees 19.99 as 19 rather than 20 but in terms of motivating a purchase it is simply a price. However, if your item falls into the category of what one would call an “emotional purchase” you can expect to generate more sales if you simply present the price as a whole number and stick with 20. When your emotional customer is able to process the number quickly it feels better than a number they have to expend energy to analyze. If you have ever been to a dollar store to buy a few small items and find yourself quickly filling up your basket the rounded “1 dollar” is the reason.
Conversely, if your product is based on a more rational purchasing decision you want to include non-rounded numbers because the brain expects to see more complexity. The more you are able to satisfy their expectations, means the faster they are able to process the cost which speeds making a purchasing decision.
And something that goes against your logical thinking or is counter intuitive. The fewer syllables a price has the lower the brain perceives the price to be. Logically it may not make sense until you understand that when you read a price your brain translates it in verbal form, and no I don’t mean you mentally “hear” yourself saying the number. Your brain translates a written number just as it would sound if you were saying it. So, the more syllables involved the more processing required to analyze it. Keith Coulter, Pilsik Choi, and Kent Monroe in 2012 found a causal relationship between syllable length and higher price perception. In other words 299 dollars and 99 cents is 
perceived as higher than 300. And don’t forget, take into account if this is an emotional or a logical decision. It all works together.
I know we have demonized the lowly 99 cents but there are ways use it and still to lessen its effect. Let’s say you include the 99 cents in your price the entire price is the written out. We have heard so much about the 99 cents that a good number of people now see it and say to themselves “I know what they’re doing. It’s 20 dollars and not 19”. Another means of making the price a lot more attractive is to present the price as 19 and then use a smaller font for the 99. Magically the number is seen as smaller because the brain will round it down.
And finally, ecommerce has exploded as a means of almost anyone setting up a website and offering a product. Having a website generally involves shipping and more people are following Amazon’s example and offering free shipping. Where the trouble begins is you offer a price say $15 and then say free shipping. Despite free shipping in bold letters the customer still sees the $15 dollar price and you guessed it, taking into account the cost of shipping requires extra mental processing so the brain discounts it. Don’t feel bad, I need to change this feature on my website as well. Better to lower the price to $12 with 2.99 shipping (did you remember to use a smaller font?) which still totals $15 dollars but your customer translates it as a much lower price.
These features and tips are the type of research larger companies have access to and readily use to drive sales. What I hoped to demonstrate, much as I did at the workshop, is that even a small business can take advantage of them. My web designer is making changes to my site right now to incorporate them. What about you?
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