Have you ever wondered why few products are listed for $199 or $299 instead of just $200 or $300? Does the extra dollar really count? Yes, it does!
That’s the result of a study electronically published in 2019 by researchers at the University of California, Berkeley. And its research might alter the way you price your products, or/and do business forever.
The research made use of millions of online bargaining interactions, mostly from eBay, where one of the researchers works. The data compiled demonstrated that products listed using even numbers —multiples of $100, ultimately received offers that were 8-12% lower than similar products listed using odd numbers and created more back and forth negotiations.
Such explanation could be extrapolated to other businesses where there is an offering price such as:
- Real estate
- Auto sales
- Consulting services [and]
- Other similar marketplaces that require negotiation.
When brands offer a price that’s in round numbers, like $300, the counteroffer tends to come in less than when the original offer is more precise, like $199.
Just ask you may be asking, “For which reason?”
There are some brands that are not just interested in the price and, absent any other way of signaling that to buyers, they set their price at a round number.”
Definitely, you care about your price. But if you use a round number, it doesn’t come off that way to the buyer. When a buyer sees these round numbers they perceive that, because the seller made less of an effort to come up with a more accurate price, the seller will make less of an effort negotiating and will therefore settle for a lower counteroffer.
Conversely, if you price your items with more exact numbers, and we will even go out on an unsubstantiated limb to say using very odd numbers like “$548.23” — then you are subconsciously saying to the buyer, “Hi, I have spent a considerable amount of effort determining this price, and I am not playing around!” A buyer will examine the price and consider whether to yield or not. Like you know, the human mind is a mysterious thing.
There is one very thing to look into, and that’s your desire to sell. If you want to sell your products faster, then the data tells you to make use of round numbers in your pricing.
Introducing this practice will for surety result in lower counteroffers, however, it will turn the deal over quicker as much as 6 — 11 days’ sooner and make your goods 3-5% more likely to sell.
Customers will take you so seriously when they cite that you have made an effort. People will be less apt to question your pricing if they get the perception that you aren’t pulling your prices out of the air.
Well, maybe you are. Perhaps, your prices are the best guesses. Whichever, you’re not alone in doing that. However, at the very least, never end that guess with a round number. Always make use of an odd number in your pricing. At least make it appear like you have put some thought into it! By so doing, you will earn more money.