Wednesday, December 10, 2008

Price Points

One of the funny things about publishing is that you can sometimes find a roomful of people all spending an awful lot of time discussing something that probably isn't all that important, like "Maybe the piece of cake on the cover should be bigger," or "Should the category be current events slash business? Or business slash current events?" One of these issues can be book prices.

It's not that book prices are never important-- when the big chains suddenly mark books down by 50% or more, their sales do pick up. And if you're trying to launch a new novelist, it can make a difference if the book is a $14 paperback compared to the $25 or $26 a well-known bestselling author can command for a new hardcover. Of course most people who are buying that bestselling author's hardcover are actually buying it at chain stores or warehouse clubs that mark it down anywhere between 20-50% off the cover price.

But the other day, I found myself in a conversation about prices that verged on the absurd. Have you ever noticed how some books' prices end in 95 cents, some in 99 cents, and some are in full dollars? Here are a few comments from that conversation:

I hate .95 and .99 pricing. As a consumer, I feel like they just think I'm stupid, like, duh, I'm really going to think 19.95 is dramatically less than $20.00 and it will affect whether I buy something?

.99 prices seem weird to me. I mean, a penny isn't that big a savings. But .95 seems like you're actually getting something.

I don't know why, but I am totally susceptible to that in stores-- for some reason, $14.95 does kind of seem more attractive than $15.00. But as a publisher, I'd rather keep that extra 5 cents!

To me the whole debate just seems silly. Pennies should be abolished, and nickels don't even seem all that useful either. I'm just glad we sell books and not gas, where you get into that nine tenths of a cent thing... but here's another quote from that conversation:

Why do we have "price points," anyway? Why are books never $15.39? Or $42.95? In the lower range, you get things priced at $20, $21, $21.95, $22.00, $22.50... but after a while, there are some prices you just never use! If you want to price a book at $32.95, someone will say that's a weird price point and why don't we either make it $29.95 or $35.00!

Have you ever noticed that things don't tend to have those weird price points? I actually went to a strange little shop in Park Slope years ago that prided itself on giving things weird prices like $6.74, or $102.66, just for the heck of it. Sometimes they'd even have multiples of the same object with different prices-- one would be $11.33 and another on the shelf would be $13.20. But that was a place run by the McSweeney's people that was deliberately poking fun at the whole concept of stores and trying to be weird...
What do you think about even dollars vs. those .95 or .99 prices? Does the extra penny or nickel really make it seem more expensive?

23 comments:

Optioned Unarmed said...

I think to some extent it may also be a pavlovian thing... We're very accustomed to thinking "yes!" to a number like $14.95, but a price such as $14.27 would be a little more like "wtf?!"

Little Miss Moneybags said...

Well, as much as we'd like to convince ourselves we're not susceptible to it, marketers have been pricing products at .95 or .99 (or .98 for clearance items) for decades, based on research that indicates it WORKS. Most people also head to the right after entering a store, and men's shirts come wrapped in plastic with a slit because men don't like the idea of buying shirts that anyone could have tried on, but women (who do most of the shopping) don't like to buy a piece of clothing without feeling it. Retail anthropology is a field entirely dedicated to studying why these weird little things affect us or why we behave the way we do when shopping.

I'm with you on abolishing the penny!

teresa said...

Why do publishers put prices on books anyway? It's not like there's a suggested price on fruit or CD's or pants (in most cases). I don't know, maybe it makes sense to set the price on: the cost to print, the amount the author is getting paid, overhead at the publishing house, cost to produce, with some margin for the distributors and sellers. Call me crazy, but things should be priced according to how much they cost to produce and sell based on how much someone is willing to pay.
But then again, I'm not in publishing, so what do I know about setting the price of a book.

Anonymous said...

In psychology, it makes sense to price it at $14.99 rather than $15.00.

When you see $14.99 cents, your mind think in cents rather than in dollars. It means much more than that penny. It makes you feel like you are getting something much more valuable. (I think it was mentioned in the book "Predictably Irrational".)

You can price something at $12.66 and the buying would think in cents as well, but ending in 99 cents would be the optimal price point.

I strongly support banishing pennies, as they are wasting our time and money. But I can understand why things are price in such a way.

When I was in Japan, I notice that they price things at very strange numbers like 4018 yen. It turns out that the total would be 4500 yen with the tax. But it might be difficult to do here as tax rate differ from state to state.

Middle Class Hick said...

quit adding the prices to items when you get to the cash register, and add them to the price of the item. When you see see an item cost 19.99 and the tax is already added to the price, then you can talk to me about getting rid of the pennies and the nickels.

I have always hated how the US does these sales taxes. It is the only country that I have ever seen where the sales tax (VAT, fair tax, flat tax) is charged NOT on the label listing the price.

@teresa - The reason there is a suggested retail price is because of what Nixon and Ford had to do to combat inflation in the 70's. They put a price freeze on things, and said they only could cost suggested retail price. So manufacturers put SRP on items, and then they had to sell them at that price. When those restrictions were released, then selling in bulk and "discounts" were given of SRP.

Tim said...

I have OCD, so I much prefer even numbers.

companies have not been challenged on MSRP. MSRP was to comply with competition and to eliminate price fixing. MSRP is supposedly a guideline whereby a retailer can pay expenses and make a profit. It's against the law for manufacturer's to stipulate prices and to force retailers to sell at a fixed price. Yet, for some reason they get away with it anyways.

Sydni Lux Presents said...

The entire .95 and .99 concept is thanks to those marketing guys who thought it would be great to make consumers think they were getting a better deal by spending .01 to .05 off the dollar. The average person mind do think in that sense and feels that .95 and .99 is better than simply .00. I guess it is the way the mind works.

WhiteStone said...

I vote to keep pennies! I love having a handful of change on the dresser and in my pocket. You guys like life too simple. Besides, I'm old enough to remember Ben Franklin's advice. And since I do, I remember that pennies add up. As do nickels, dimes, quarters. LOL

mOOm said...

The smallest coin here in Australia is 5 cents. If you pay with cash they simply round the price here. But if you pay with a card etc. you pay the exact amount. There does seem a little less tendency in Australia to do those 95, 99 cent prices than in the US. Though it's very common for fresh food.

Budget Save Buy said...

Many summers ago I had a summer job at Pottery Barn. The discount employees got was based on what the price ended in. One of the discounts applied only to items ending in $X.97 or something weird like that. And then any other priced item got another discount. I highly doubt that's why prices are priced a certain way but I always thought it was a weird way to determine what discount employees got.

Funder said...

You're a New Yorker, so it doesn't surprise me that you haven't noticed this - but Wal Mart sells very few items for x.99. It's almost always some weird amount of cents, to show how it's "slashing prices to save YOU money" (out of the goodness of its heart, of course) or a quantity price, like 3 for $5.

Caleb said...

I remember in my high school business class talking about this very issue. It was pretty much what was stated here. Items ended in .99 or similar odd number are intended to give the consumer the feeling that they are getting a great deal. On the other hand, some retailers will use prices ending in .00 or .50 and that we somehow believe that conveys a feeling of luxury or high quality.

Revanche said...

I suppose I'm an odd one out: whenever I see a price, I immediately round up to the nearest dollar. So it's never "$14.xx" it's "$15 plus tax." The cents only matter to me if I can add the tax and it comes out to an even number total. Then I'm amused and a little bit pleased.

Tim said...

yeah, but when your shopping cart ends up being 1cent short of the even number required to get a discount or free shipping or whatever, that really pisses me off. it is all due to .95, .99, price points.

Middle Class Hick said...

@Tim - Don't move to Wisconsin. You are not allowed to sell items for a loss per law. You have to sell things at a profit, and the profit is dictated. That is why you never hear of someone dying in Wisconsin of a Black Friday thing, Black Friday to them is nothing because that $399 has to be sold at least at a 14.9% profit and so then the cost of the TV is $435 at every store.

finance girl said...

There's psychology behind it indeed, b/c that is how consumers buy and make decisions.

Learned this in Consumer Behavior class back in the day, one of my favorite classes.

Consumer Behavior and Behavioral Finance are very fascinating subjects; shows us for who we are re: $ decisions.

Bill said...

Its all how you perceive, just like gas, why not make 1.99 instead of 1.999, I have even seen 2.474 in some Canadian stations. round it off, its easier for accounting and for everyone else.

Tim said...

@Middle Class Hick: you betcha, I would never move to Wisconsin, don't worry, and we've shunned my sister for ever having moved there (she's been put in an institution to recover from her lapse in judgment) from Minnesota. I've also really pushed hard to get the State legislature to erect an electrified fence to keep Wisconsiners out of Minnesota. don't want price fixing to bleed over, ya'know.

Anonymous said...

i've been living in the uk for several years now and LOVE the fact that the tax is included in the listed price. it doesn't bother me that things are 9.99, but at least here 9.99 means 9.99. While back in the US i think I have enough cash only to find out actually i need more than the ten dollar bill i have...lol.

Kathrin said...

The US can't get rid of the penny - what will happen to the concept of the lucky penny?

But seriously, like MooM I'm in Australia - I was a kid when they got rid of 2c and 1c coins.

My theory is it all evens out - sometimes something will get rounded up, sometimes rounded down.

bugbear said...

Yes, people are that dumb. Even the smart ones.

When anyone, even a mathematical genius, thinks or sees "3.99", the main thing he or she is thinking is "3" because it is the leading value. The ".99" follows the 3 or leading value like an after-afterthought at the more basic levels of cognition and number sense, which is based on the counting numbers. Rounding up the ".99" to 1 and adding it to the 3 is too abstract an operation and your emotional/basic brain has already registered "3" anyways,so that's what you think.

That being said, customer psychology may not be the origin of .99 and .95 price points. I heard an interesting statement from an old time retailer about the origin of ".99" and .95 price points in stores, and it doesn't have to do with customer psychology.

In old time retail, when you had manual registers (or no register), store owners or managers had to deal with cashiers who would skim off a dollar or two off a purchase, not put it in the register, and ring up the decreased amount after the customer left so no one would see the discrepancy. It was easy to keep count of whole dollar amounts in their head, and at the end of the day they would walk off with $50 of stolen cash in their pockets.

With .99 and .95 price points, it became much more difficult for them to do the math for a multiple item transaction in their head, and more likely that they would make mistakes in the day with the running total as well, providing a clue to the manager/owner that there might be skimming going on.

Ishtar said...

Some people do not see $95.99 when they look at a price. They see what they want to see, which could be $90, $96, $95.99 or $95

So retailers score with more than half of the population because their minds just work differently.

Also, Retail anthropology sounds interesting.

bugbear said...

If you like retail anthropology, check out Why We Buy or anything by Paco Underhill.