Pricing Psychology is one of the most fascinating areas of direct response marketing.   In this post I’m going to reveal to you how you can change your pricing by a couple pennies and get 20-30% more sales.  I’m also going to reveal a strategy where you can INCREASE YOUR PRICES and GET MORE SALES!!!  Here we go:

1.  Fractional Pricing

Psychologically speaking, there’s a huge difference in $29.99 and $30. Pricing theory says that products ending in an odd number (fractional pricing) convey greater bang for your buck than prices rounded up to the next whole dollar.  This $.01 difference increases conversion rates by approximately 30%.  And you better believe it has nothing to do with the one penny saving :p

The reason why fractional pricing converts so much higher than whole dollar pricing is really simple.  Consumers believe that merchants whom price their product fractionally have priced it as low as possible, hence the odd number.  The consumer completely ignores the last digits and sets a lower pricing in their head.  i.e. If you’re looking for a home in the 200-300’s range, a house for sale at $299,999 automatically seems much more affordable than a house for sale at $300,000.  The pricing difference is $1, yet consumers automatically fixate on the 200’s range when they see the house for sale at $299,999.

Research shows that prices ending in 98 or 99 convey much more savings than all other prices, including 49, 70, 80.

NOTE: Fractional Pricing decreases value for Prestige Items such as high-end items (Bang and Olufsen) and luxury brands (Gucci).   Always round up to a whole dollar amount when pricing for Prestige Items.  You should only use fractional pricing on non-luxury / non-high-end based items.

2. Prestige Pricing

If you have a high end or luxury based product,  then you should round the pricing to a whole number.  Rounded whole numbers increase the perceived value of brands.  i.e. $5,000 suggest higher quality than $4,999.99.  Louis Vuitton, Hermes, Gucci, Bang & Olufsen, and LimeLight CRM all round up to whole numbers.  Subsequently those lines scream HIGH QUALITY!

NOTE: Prestige Priced Brands NEVER offer discounts.   The moment a prestige brand goes on sale the perception is:

– the brand is losing popularity.

– the company is having financial problems.

– the actual value of the product must not be that good.

– the other brands that are maintaining their pricing are better.

Prestige Pricing is diametrically opposed to Fractional Pricing. 

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