As one of the 4 “P’s” of marketing, “price” is a critical piece of the marketing mix. Along with product, place, and promotion, the right price can make or break the success of a new product. Prices that are too high may limit market penetration; prices that are too low may seem too good to be true. Other than price point, do the numbers themselves have any impact on customer perception.
According to an article in Scientific American Mind entitled “Why Things Cost $19.95,” the ending pricing numbers do, in fact, make a difference. According to the article, the last significant digits set the anchor point for analysis. Something that costs $500, for example, is a round number which is associated with a guess (i.e. about $500). Therefore, the product may be worth $450, $475, or something like that. If the product is priced at $495, the last significant digit is in the “ones” place as in “5″. Being much more precise compared to rounding, the customer may perceive the actual value to be $490 or $485, both of which are higher values compared to the association with the $500 price point.
While the detials of the article are supported by field tests, doesn’t it just sound better to buy something for $19.95 than 20 bucks? After all, who doesn’t feel good buying the latest infomercial gadget for three easy installments of $19.95?
Filed under: Marketing | Tagged: Marketing, Pricing Strategy, Scientific American Mind
