Setting prices on a store... do cents matter?

I've always wondered and have read conflicting reports from people. But what change should be put in a price to help incourage the sale?

For example... we all know a widget for $8.00 will sell. A widget for $7.99 will sell better... and a widget for $7.95 will sell even better (What a deal!!!). Those last 2 prices are the most common form of "cent" pricing we see online and in retail stores.

But just because it's the most common, doesn't make it the best.

Walmart.com must spend some $$$ figuring out the best way to price their products. They don't use the traditional .99 or .95... they use .88, .84, .72, .63... and so on. Is that random? No... not in my opinion. If you browse their site you'll notice you only see the same "cent prices" again and again. They'll use .88 many times... never .87.

Just makes you wonder... is there a best "cent price" to use. Maybe it even depends on the dollar amount. $5.77 may sound cheaper then $5.55 (in our subconcious). But $6.77 may sound more expensive then $6.55. Follow me?

Yea... most people won't care... but what if this makes a difference? What if it only affects 1 in 100 shoppers. Or even 1 in 1,000. That's still a big difference depending on the number of sales you do a day.

Does anyone have any input on the best way to use their "cents?" Any links ot any studies that have been done on this type of pricing?

 

Yes prices matter. There are magical price points that people have a harder time rationalizing than others.

.95 is better than .99

19.95 is better than 17.95

29.95 is better than 24.95

etc etc etc

Lots of marketing studies have gone into this.

 

It is McDonald's or Burger King.
Then a buck rules, 2 bucks rules.
For some reason, fast food places seem now to go to one buck, 2 bucks, etc.
And advertise that fact!

But selling say ebooks, software or scripts....
Very true...sell an ebook for $47.00, you will sell some.
But make the price 47.99 (or 46.99) and you will sell more.

 

lorien, is there a resource you can point me to with regard to that study? i'm interested to know why those figures have different effects.

 

Do you have any referrences to this? I agree with what you say but I'd really like to read about these studies.

I'm not sure about $29.95 being better then $24.95 though. If you can set your own price and there's no competition for what you're selling I can see $29.95 being the best price. But if the product you sell is competative people will compare prices. Although $29.95 may convert to the most sales with people that don't care to price match, $24.95 would most likely convert to the most sales because most people will compare several store prices to find the lowest price.

What I'm really interested in is the cents (not the dollars). Does $24.54 sell more then $24.49? $24.49 is a lower price but (to me) $24.54 sounds like it actually costs less.

 

IMHO, in this context cents may be useful when they help to visually suggest to a consumer that the price is just less than it could have been (i.e. 4,99 but not 5,00). Otherwise, cents' price variations will rather confuse a consumers while they are making their calculations.

 

To be honest with you, the last time I heard about these was about 10 or 12 years ago. I do not know if they are online or not. I haven't really looked lately - every once in a while I mean to, but I never get around to it. Wish I had a page to show you

 

It also depends what you're selling, and the nature of your market. If you're selling high end items aimed at affluent customers, who aren't necessarily looking for a bargain (and who might be put off by any impression of 'cheapness'), whole number prices might be better - you don't see many luxury brands with .99 or .95 price tags!

 

Yep, I agree that it depends on what you are selling and what the consumer perception is not only of your specific product but of your product category.

I've been a lifelong retailer and I can tell you that cents do matter. The difference between 7.99 vs 8.00 is huge.

But it will vary on product, industry, grade, etc.

 

There is also a difference between prices of $99 and $99.99. Apple seems to always price without cents. I guess it is sort of a compromise between luxury and value.

 

perception is reality. Some folks retail at a flat price point -- $4.00, $10.00, etc like a dept store -- and other folks do it $3.99, 9.99 etc...all trying to work their angle.

So yes, it matters. And no, there is no one right way to do it.