Pricing Strategies

You must have noticed that Walmart charges prices like $14.88 for things and not $15. I have taught myself to say fifteen dollars when I see these kind of prices, but psychologically, I still probably still see $14.88 as less than $15.

The reason for this kind of pricing is that there are built in levels of cost that people see as cheap or expensive. The lowest level is $1. One dollar is cheap, but 99 cents is cheaper than cheap. It jumps by increments of $5 up to twenty or twenty-five dollars and then there is a break at $40. $50 is moderately expensive, but $39.99 and even $49.99 is considered affordable for an impulse sale.

The cents column obviously makes a difference, too. Walmart spends millions researching this stuff so that a price ending 88¢ or 63¢ is not a whim, but scientifically based decision. It appears like a generated price based on the cost of the item, but it is not. The pricing decision is based on years of research and has nothing to to with the store’s cost of the item.

If you sell something online, you have to be aware of how the buyer sees pricing. If the consumer is considering a sale, they probably are no longer price comparison shopping, especially if, for instance, you are selling an MP3, Book, or unique item that is not available on other sites. You do not have to set the price based on the price of similar items on other websites.

Your price can appear to be reasonable by picking one of the price barriers. If you have been selling a book for 11.50, it is quite likely that you could raise the price to $14.88 or $18.44 without reducing your sales. The price still appears low. The 88¢ or 44¢ makes the price appear that it is mathematically the lowest price that can be had for the product. A book costs somewhere less than $20. A cheap book costs something less than $15.

If you sell things online, try doubling the price and then backing off to under a number divisible by 5 and use an odd number for the cents. Do this as an experiment on a product or two that would normally sell well. Check your figures at the end of a month. You may sell slightly less, but you should make more money.