Learn These Pricing Techniques - and Never Overpay Again
Life + Money

Learn These Pricing Techniques - and Never Overpay Again

Reuters

It's one of the oldest and most obvious retail tricks in the world: Put the number ‘9’ at the end of a product’s price – and watch sales soar.

The number \$29.99, for example, seems a great deal less than \$30.00 – though there’s virtually no difference between them.

Most American consumers are savvy to this tried-and-true numbers game. “Yet even as seasoned shoppers, we’re still fooled,” says Alex Bellos, a mathematician and math blogger based in London.

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An expert on numerical logic and mathematical concepts, Bellos says that because we read numbers from left to right – encountering the smaller number at the start of the price – we have the perception that the \$29.99 price is considerably lower than the just-one-cent higher \$30.00.

His new book, The Grapes of Math: How Life Reflects Numbers and Numbers Reflect Life, shares practical insights into consumer-focused pricing strategies, which Bellos discussed in an interview by phone from his home in London:

The \$.99 pricing technique is effective because it “conveys there’s some kind of deal. Usually we want that deal – but it’s more complicated than that. Sometimes we don’t want a deal. There are only some kinds of products you would expect to see with the \$.99 price structure.” Shampoo, let’s say. Tissues. Paper cups. “But if you went to a neurosurgeon for a consultation and the fee he charged you ended with a \$.99 – you would think he was some kind of charlatan.”

Studies show that prices ending in the number 8 and 9 are harder for people to recall than prices ending in 0 and 5, “since the brain takes longer to store and process the higher numbers. So if you don’t want customers to remember a price – to prevent them from comparing prices with your rivals, for example – use a number ending with 8 or 9.”

Conversely, if you do want a customer to remember a price, “maybe to emphasize that it’s cheaper than a competitor’s price, then label it \$5 and not \$4.98.”

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By omitting dollar signs from menus, restaurants reduce the “price awareness” of their customers. “A Cornell University study found that when the price of a dish was listed as 20 rather than \$20, a New York restaurant increased the average spending per customer by 8 percent. The \$ reminds us of the pain of paying.”

Another clever menu technique is when prices are placed right after the description of each dish, rather than listed and organized in a column. Simple reason: “Listing prices facilitates comparison.”

Numerical patterns encourage buying. “They affect us psychologically. Here’s an example. Two math professors created a fictitious ad for contact lenses that read, ‘6 colors. 6 fits. Solus 36.’ They found it was much more preferable and popular with people than an ad that said, ‘6 colors. 6 fits. Solus 37.’”

Why? “Our familiarity with 6, 6, and 36, from the sum 6 X 6 = 36, increases our processing fluency of these numbers. We actually get a buzz from subconsciously recognizing a simple multiplication, and we attribute that buzz to satisfaction with the product. So we want that product, and we buy it. But there was unease and cacophony with 6, 6, and 37 – they didn’t compute.”

We associate round numbers with big numbers, and exact numbers with smaller numbers, though there may not be much difference between them. The result? We’ll pay more for an expensive item if the price is non-round. “In an experiment done by a Cornell psychologist, people viewed photos of houses that were priced at \$390,000 and at \$391,534. On average, they judged the precise price – \$391,534 – to be lower than the round one.” Inside tip for those trying to sell a home: “If you want to make money, don’t end your price with a zero.”

Bottom line in the mathematics realm, says Bellos: “Every number tells a story – and every context is different. Essentially most people don’t overthink this when they’re shopping. They go along with it. They’re sometimes numb to it. It’s why numbers are precisely positioned to do certain things – and why we should be aware. Numbers are not impartial and straightforward. They have baggage.”

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