Everyone seems to be doing it. TV commercials, radio adverts, print media and online sales stores all seem to be leveraging the .99 cents pricing model to attract more customers. Does it really work? Brands and entrepreneurs are not just copying an old sales approach 0 it is a strategy that has worked overtime and helped businesses sell more products.
Writing product prices as $4.99 against a standard price of $5 started many years ago. There are many theories and stories about the origins of this method of pricing. Some say it was a means to prevent staff in charge of physical stores from stealing money because they woud need to give change to the buyer who would probably pay with a $5 note.
It is interesting to note that the 99 cents pricing strategy, which started with physical stores, is now very common in e-commerce.
The .99 pricing has been given the term ‘charm prices’. As the name suggests, writing prices with the inclusion of 99 cents is aimed at encouraging consumers to make a quick buying decision, according to https://www.cbc.ca/radio/undertheinfluence/the-real-reason-most-prices-end-in-99-cents-1.4731238#targetText=Over%2060%20per%20cent%20of%20all%20prices%20in%20all%20stores,priced%20at%20%2420%20and%20%2425.
The study suggests that since we read from left to right, it is easier for a potential customer to regard the first number indicated on a price label ignoring the 99 cents. This means you can reduce your price by one cent and sell more. For example, if a customer who wants to buy a product commonly sold at $10 sees your advert for the same product priced at $9.99; they will be more attracted to your offer.
The rationale is this; the customer regards the price $9.99 as more attractive than a rounded up price $10. It will seem you are selling the same product at a lower price.
Charm prices, when used as a sales strategy, can considerably help you gain a significant sales advantage over the competition. Think about it; every consumer out there is searching for brands or products on sale at lower prices. Pricing goods with 99 cents depicts a more economical price, which will attract many customers.
Another perspective that can explain the higher sales figures with 99 cents pricing is that the customer perceives it as a discounted price.
You know how quickly a decision is made to buy discounted products. With the 99 cents pricing, more customers will be happy to buy your products believing they are getting some form of discount after purchase.
The statistical significance of the 99 cents pricing model is apparent when you compare sales reports for goods priced with 99 cents and others sold at the standard rounded up price figures. In this published report, it is evident that products priced with 99 cents sold more than other regular priced products ending with 00. For example, items priced at 19.99 sold more than items priced at $20. This was also the case at items priced at 199.99, compared to items priced at 200.
In conclusion, you can gain more by using the 99 cents pricing model for your business. Here’s the thing, losing one cent to attract more buyers will increase your sales. Give it a try – update some of your prices to feature 99 cents and we are sure you will not regret it.