💡Use this Pricing Strategy to Boost Sales

Charm Pricing: Why Prices Ending in 9 Influence What We Buy

Author

Juan Diego Diaz
April 04, 2024

TLDR:

Charm Pricing: Prices ending in "9" (like $4.99) boost sales because our brains focus on the leftmost digit, making them feel closer to the lower number ($4) than the actual price ($5). This psychological bias can make your products seem like a better deal.

✍️ You are probably persuaded by this tactic

Let’s say you are doing your groceries. You toss a bag of pasta ($1.99), a jar of sauce ($3.49), and some vegetables ($4.49) into your cart. Feeling happy about the "good deals," you continue, grabbing cereal ($3.99), milk ($2.79), and some fruit ($2.49). Lastly, you take one bottle of olive oil ($5.99) and some freshly baked bread ($1.99). You quickly do your mental calculations and think it should come to about $20-$22. At the checkout, you are briefly confused and a little shocked. In reality, you’re closer to $30 because you spent $27.22.

🧠 The three reasons why this pricing strategy is so powerful

The Charm Pricing tactic, pricing your products so they end in "9", leverages two phenomenons. First, the left-digit effect, and second, we perceive prices ending in “9” as being a better deal because of all the advertising we have seen before. Our brain directly associates 9-ending prices with discounts. Here’s a simple breakdown:

  • Our brains process numbers from left to right: When we see a price like $4.99, our minds tend to focus more on the leftmost digit, the "4" in this case. This creates a mental shortcut where $4.99 feels psychologically closer to $4 than $5.

  • Anchoring on the left digit: This initial processing of the left digit acts as an anchor, influencing how we perceive the entire price. Even though the difference between $4.99 and $5.00 is just a penny, the "4" creates the illusion of a much lower price.

  • The perception of a better deal: This anchoring effect makes us feel like we're getting a better deal with the "9" price, even though the difference is minimal. This is influenced by our past experiences as well. Almost every time that an item is “on sale” companies strategically put nine-ending price tags on these products. Hence, we associate this number with getting a good deal.

💡You could see a conversion rate increase

In 2013 Gumroad, a platform used for selling digital products, analyzed all their products under $6 and compared the conversion rates for items ending in 99c and items ending in a round dollar number.

For items priced with a full dollar amount, the conversion rate was 2.3%. However, prices ending in 99c had a conversion rate of 3.5%. That’s a conversion rate increase of about 51%! Not bad, right?

But this doesn’t mean that you should start applying this directly to your business. It depends on what you are selling.

✅ This doesn’t work with every product

Higher-priced products like luxury watches, cars, or even fancy restaurants will not use this approach because they don’t want to attract price-sensitive customers. They want the opposite result of Charm Pricing. They want to convey the message that the items being sold are high quality and not on discount.

Since it’s hard to guess if this psychological pricing tactic makes a difference for your products, I would recommend doing an A/B test on your website or your ads and see if including or excluding charm pricing in your offers makes a difference.

This would be the best approach because each industry and each audience is quite different from each other. But giving it a try could help possibly increase your sales and conversion rate. And sometimes, crazy stuff can happen.

For example, a real-life experiment showed that prices ending in 9, even if they are higher, could still increase your sales! Researchers partnered with a retailer and created 3 different versions of their clothing catalog. In the control group, a specific dress was priced at $39. Then, they increased and also decreased the price of the same dress in two other catalogs by $5.

The dress in the control group for $39, was sold 66 times. When the price was $44, the retailer sold 45 items. This is a reasonable scenario, right? Price increases lead to fewer sales. However, when the price dropped to $34, they sold only 46 dresses! Why? Since the price did not end in “9”, people might have thought that it wasn’t on sale, making it less appealing. On the contrary, people that saw the $39 dress, probably thought that it was discounted from a higher price, making it look like a better deal.

So next time you want to change the prices of your product, before decreasing them, first try increasing them to the next 9-digit number. The result might positively surprise you.

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Thanks so much for reading,

Juan Diego

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