
A Penny Saved: Psychological Pricing - sahillavingia
http://blog.gumroad.com/post/64417917582/a-penny-saved-psychological-pricing
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ddlatham
I love buying when prices are quoted in even amounts, especially if they
include the tax. It makes me sad that we humans are so affected by tactics
like this and that sellers (rationally) take advantage of them.

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anigbrowl
Me too. I know I'm in the minority with this, but I much prefer to do business
(repeatedly) with a firm that isn't employing bullshit tactics. It would be
interesting to see a study that reflects the whole cost-per-customer, since
resorting to such pricing tricks means you're inevitably attracting consumers
who are extremely price driven and who may be harder to upsell or retain.

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whichdan
There's a burrito chain in the northeast US called Boloco, and while their
prices seem pretty arbitrary, all of the post tax prices are always whole
dollar amounts. It's the only place I know of in Boston that does that.

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prof_hobart
As a Brit, I was amazed first time I went to the States with this idea of
shops not putting the actual price you're going to pay on stuff.

I don't care how much money the shop is getting, as opposed to the state. All
I want to know is how much money I'm going to be spending to get the thing,
and I don't want to have to do calculations to work it out.

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abrowne
As an American, I'm used to our system, but I don't like it ... but, the
tricky part in the US is that sales tax(es) aren't national, so prices differ
at state, county, city, and sub-city areas. I single café can build the tax
price into their prices, which I do see occasionally, but there's no way to
advertise a price of a something, including the tax, nationally (or even
across all of my city, Minneapolis, for example).

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CyrusL
I am hesitant about the value of the data in the chart. It sounds like out of
all the products sold via Gumroad, the .99 products convert better than the
.00 products. Couldn't that just mean that the sellers who use .99 are savvier
with pricing and probably also doing other things to market their products
better?

Better data would be the same product sold in .99 and .00 versions. I imagine
the conversion rate differences wouldn't be so dramatic in that chart.

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pbreit
Good point. I'm sure studies have been done and merchants set such prices
accordingly.

This guys appears to have reviewed a number of studies and concurs. BUT...he
also thinks that "round" pricing may support luxury branding better. That's
partly why you probably can't do simple pricing difference between the same
product at the same store.

[http://www.sciencedaily.com/releases/2011/09/110906144036.ht...](http://www.sciencedaily.com/releases/2011/09/110906144036.htm)

More about the topic: [http://www.quora.com/Pricing/Do-prices-at-99-instead-
of-1-00...](http://www.quora.com/Pricing/Do-prices-at-99-instead-
of-1-00-result-in-more-sales)

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vacri
Interestingly, in Australia where taxes are in the sticker price, most retail
prices are .99 or .95. When I was in the US, where the taxes mean you have no
idea what the checkout price will be, it was weird to see so many prices at
.29, 39, .59 and so on.

I assume it was tax-related, because forking over cash and getting shitty
amounts of coins back is not something that's common in Australia, but a
necessity of the way Americans do retail - and a .99/.95 regime helps avoid
that. There's no 'leave a penny/take a penny' tray in Australian retail
culture, for example. This reasoning is admittedly idle speculation,
IANARetailer.

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wtbob
> There's no 'leave a penny/take a penny' tray in Australian retail culture,
> for example.

There wasn't one when I was a boy in the US, at least not that I remember. I
think that they started to be a thing around the time I graduated college, and
of course they're now everywhere. Just today I paid for some coffee and got
back an integer number of dollars because the clerk made up the cost. Of
course, it was in her interest, because I throw change or a dollar into the
tip jar when the tab is small enough that the tip is less than a dollar.

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Amadou
I down-modded you because references to when you were a boy and when you were
in college without actual dates are meaningless to everyone else.

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nitrogen
I really don't think that's worthy of a downvote, though. Being deliberately
obscure with dates and ages can even be interesting sometimes.

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Amadou
This gave me a great idea for a defensive firefox plugin, maybe even just a
greasemonkey script:

Any number that looks like a price (currency sign nearby with a .99) is
automatically rounded up to the next integer when displayed in the browser.

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Semaphor
I always round prices up that end with .9x. On Kickstarter when prices are $79
I count them as $80. Saving me that minor calculation makes me more likely to
buy something, it simply removes an annoyance. Is that really un-normal?

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sejje
I'm not sure. I also do this, but maybe something is happening, even to us,
subconsciously.

Maybe the effect goes away if we walk away and remember the price as $80,
though.

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Semaphor
I think one effect might be that when you don't look to closely at something,
and later remember the price being just what's before the decimal separator.

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mooted1
I don't know about this. The post compares items where the seller chooses to
price at whole numbers versus where the seller chooses to subtract a penny. It
seems to me like a more likely explanation is that less savvy sellers who
produce lower quality products are more likely to price at whole numbers. A
100% jump in conversion based on a change of 1 penny seems kind of absurd to
me.

If anyone has done controlled tests of this effect and seen comparable
results, I'd love to hear about it.

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akanet
I would love a once-and-for-all answer on this topic. Hell, even a rule of
thumb like "If you are positioning your product for the mid to high end
market, go with X"

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keltex
That's why A/B testing is always a good idea. Try it both ways and see which
converts better.

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akanet
I'd love to but I don't have enough traffic to conclude this in faster than
like, a year.

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avalaunch
In that case make your best educated guess and focus on something that matters
a lot more to your business right now - driving more traffic to your business.

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ollysb
As an alternative hypotheses, whole number prices are so rare that they might
actually less familiar and it's this that causes the lower conversion rate.

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Theodores
British supermarkets have plenty of products priced at round pounds, or £x.50.
This is particularly the case with BOGOF deals, e.g. two packets of cheese
might cost £3 whereas individually they may cost £1.89 each. Why is this?

There are two reasons. The round price is an honest price, nobody has tried to
fiddle the price to look less than it is by putting the 99 in there. Secondly,
for those shopping to a budget, e.g. not planning to spend more than £20, then
it is a lot easier to add up round figures than lots of £x.99's.

The one that I don't understand is £x.95. Why would a retailer want to put
(say) a thousand items through the till at £x.95 when they might as well be
£x.99? 1000 * 4p is £40. That might not seem a lot of money, however, at
minimum wage(!), that is enough for some extra pair of hands on a busy
Saturday.

With online retail a lot of websites charge round figures for delivery and
services such as gift wrapping. I can see the sense in that, however, it would
be good to see an A/B test from a major retailer to see if getting that wrong
means more customers bailing out at checkout.

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refurb
Speaking of "two for $X", i've noticed plenty of shops leave it to the
consumer to assume that they have to buy two when in fact the price of one is
$X/2.

Safeway does this a lot.

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pmahoney
Back when I worked at Target, it was also this way. As I understood it, the
system simply did not allow for a multiple item discount. The "3 for $4" ads
did always say, in fine print, something like: unit price $1.33.

What got me was that a 12-pack of certain replacement razors was more
expensive than three four-packs. I distinctly remember that one, having done a
double take and checking my math with a friend.

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djkz
When I played on World of Warcraft Auction House the main advantage of this
tactic was the fact that it placed your items before all evenly priced items.
I've exploited that for a while to move large amounts of inventory.

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makaed
"At Gumroad, we’ll stop just shy of letting you charge tenths of cents (come
on, gas stations, that’s cheating) or allowing the font on your change to be
smaller on-screen."

Does that mean they won't allow it in the future?

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adrianbg
As a consumer I'm pretty aware of this tactic. I probably still fall for it,
but I also notice and think better of sellers that don't use it.

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brianbreslin
Any idea why Wal-Mart uses .88 in their pricing?

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lotyrin
Some retailers use the last digit to encode information about the price, like
whether it's controlled by the manufacturer, whether it's a seasonal price, or
whether its been marked for clearance.

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nnnnni
"geoduck clam", ha.

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michaelochurch
That's the Anchoring Effect. It's not just about 3.99 appearing cheaper than
4.00. It appears cheaper than 3.00 because the 9's make the 3 look small.

$3.29 appears especially cheap. The cheapest-looking price point between $3
and $4 is probably $3.19 or $3.29. ($3.09 isn't as cheap-looking, because the
'0' adversely anchors the 3.

There is a trade-off in the appearance of simplicity, of course. If you're
selling cars, for example, you get more mileage (no pun intended) out of
$29,500 than $29,999.99. Restaurant menus are one example of that, wherein
whole numbers ending in '8' and '6' seem to be favored (18, 28, 36).

~~~
eru
> That's the Anchoring Effect. It's not just about 3.99 appearing cheaper than
> 4.00. It appears cheaper than 3.00 because the 9's make the 3 look small.

Compare
[http://www.economist.com/news/briefing/21588057-scientists-t...](http://www.economist.com/news/briefing/21588057-scientists-
think-science-self-correcting-alarming-degree-it-not-trouble)

