Wednesday, July 20, 2011

Playing a Number Game: The Logic Behind Numbers in Pricing

You ever wander into a store and wonder why merchandise is priced the way it is? Why this item is $X.99 and the item right next to it is $X.97? Wisebread published a great article on the psychology of pricing back in April. I believe there are applications for this information in the context of selling on Etsy.

For me, I can't ever see myself pricing a hand-made craft at $9.99 when I could just round up to $10. This comes from my experience selling at fairs and conventions. I am not walking around with coins in the cashbox and handing back pennies if I can avoid it. But it might be worth looking into if you want to pull in a certain kind of online audience.

It's almost like you have to play a game with pricing until you get it just right.

Some music to work off of.

The article linked above goes into the psychology of four different ending numbers.

  • A price ending in 9 is about bargains and positioning. You will be cheaper than the next item ending in zero in a search by lowest price so you're seen first and that penny off seems like a good deal.
  • A price ending in 0 signifies premium quality. High end departments stores rarely do anything but $X.00 on their most expensive items. It's about prestige.
  • A price ending in 4 or 7 signifies precision. You can't possible offer it any other price because nothing else will work for the customer.

So how do you harness this kind of psychology? In certain kinds of products--bath & body, housewares, budget jewelry--you can easily get away with the $X.99 strategy. Buyers expect it from other sites and it can be what sets your hand-beaded earrings apart from the next similar hand-beaded earrings. Even if one kind of customer realizes what you're doing, another customer might feel more comfortable with the pricing strategy they're used to from online shopping.

In higher end products--woodworking, fine art, expensive jewelry, rare vintage--you should exploit the $X.00 pricing strategy. When you're dealing with items that cost hundreds of dollars, it's better to be precise. That round number is easier to wrap your brain around as a buyer than the reason why in that price range you're shaving off a few pennies. Better to be a dollar or two off of the next big round number than a few cents after a certain point.

What about the 4 or 7 endings? I'm not sure how well they'll work on Etsy. I see random looking prices on certain items and wonder what the seller is thinking. Is it some kind of incantation or philosophy? Are they trying to distinguish themselves by price alone? I can only see this working in high precision crafting where you can calculate the value to the nearest cent based on the quality of the material and the amount of labor. I wouldn't price machine embroidery or vinyl cut-outs like this, but I'd consider it for certain kinds of needlecraft and decorative woodworking.

In the end, pricing is another way to distinguish your brand. However you use this psychology of numbers in your shop, it should be consistent. Similarly sized and manufactured pieces should be about the same price. If one 5 inch tall figure is $5 and the next is $4.99, it looks off and draws attention to the price. If the whole shop sticks to one pricing scheme and seems consistent with itself, it becomes a matter of the quality of the product and the needs of the buyer. That is the best situation you can create in an online marketplace. 

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