Wednesday, September 14, 2011

99-Cent Pricing: A Good or Bad Idea?

According to a Science Daily article, Robert Schindler, professor of marketing at Rutgers School of Business-Camden, has spent years studying this marketing strategy, and he says that people pay more attention to the leftmost digits in prices.  There is a larger perceived price difference between just-below pricing like $19.99 and $24.99 than when it is between round pricing like $20.00 and $25.00.  So, consumers feel they are getting a bargain.  However, this just-below pricing may be tied to low or questionable quality in the consumer's mind.  For instance, when it comes to luxury goods, most people are concerned with quality over price.  So, when it comes to luxury goods it may be best to avoid the just-below pricing (Rutgers University).

The question then is where does a fiction ebook fit?  Should it be priced at $1.00 instead of 99 cents?  And how will your round pricing hold up against the just-below pricing? 

The answer might be in an older article at Science Daily, in which a price comparison experiment was conducted by Kenneth C. Manning and David E. Sprott.  When two pens were priced at $1.99 and $4.00, only 18% of participants selected the $4.00 pen.  There was a larger perceived price difference when comparing the cheaper, just-below price and the larger round price.  However, when the prices were $2.00 and $3.99, 44% of the participants chose the $3.99 pen.   The difference between $1.99 and $4.00 is $2.01.  Between $3.99 and $2.00?  $1.99 (University of Chicago Press Journals).  Only a couple pennies difference, but the perceived difference was much greater than two pennies worth.

It sounds like an interesting experiment.  I'll have to do some more research into the vendor's side of it, but it might be worth it to try pricing ebooks with round numbers.  Though, I don't think it matters at the $1.00/99 cent pricing level, because cheap is cheap.  But what about above the one-dollar level?  Is it better to price at $3.99 or $4.00, for instance?  How much difference will that one penny have on your readers?



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