As a small business manager, it is vital that you educate yourself in the secret psychology of pricing. Pricing psychology is an intelligent way of increasing margins and profit. Understanding how pricing works is an essential weapon for the small business manager in today’s battle for profits. There are many opportunities to lift profits
Do you know why $9.99 outsells $10.00 by 10% to 20%? It can’t be because of the 1 cent lower price. But most of us know that it works. To understand why you have to be aware of the psychology of our subconscious.
There is a theory that suggests when we were much younger and crawling on the ground, we learned things that are wide are also big. This embedded a learned pattern response in our brain that survives in adulthood.
The price of $9.99 is five symbols wide and $10.00 is six. But what is more important is that $9.99 is in the 900 cents range whereas $10.00 is in the 1000 cent range.
OK let’s look at this from a different perspective and use this knowledge. When you are offering a discount, rather than show it like this, $23 reduction, make sure that you show it like this, $23.00 reduction.
What is absolutely amazing is that researchers have discovered a fascinating piece of information about pricing that every single small business manager should know. This fact has been validated and verified by millions of tests.
The key piece of research is this. In countless tests, the magic number 7 produced 10% more sales than any other number when it was the last digit in the price. So $9.97 out sold $9.99 by 10%. $197 out sold $$199 by 10%. Now, how valuable is this information to the small business manager?
There are many theories for this phenomenon. None have been validated yet.
Remember, that your objective as a small business manager is to maximize profits. This valuable information will give you the opportunity to look at your profit options.