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Why prices ending in 9 sell best: MIT study

Have you ever wondered why prices at retailers usually end in the number 9? It’s not because it’s a sexy number, there is science behind it.

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pricing with nines

pricing with nines

Why the number nine is so powerful

[ba-pullquote align=”right”]Finding the right price to attach to a product or service is an art.[/ba-pullquote]Pricing your product or services may be one of the most stressful parts of owning a business. You know your service is valuable. You know there is an audience out there that understands that value. But finding the right price to attach to a product or service is an art. If you price something too high, you won’t be as successful. If you price things too low, customers may not think your service is valuable and you won’t be making what you deserve. Finding the perfect balance is important, but it’s also about knowing how customers view prices, especially prices that end in the number nine.

We’ve all seen pricing that ends in the number nine. Take purchasing gasoline, for instance. It always has the same formatting, no matter which gas station you frequent. You’ve seen it in nearly every store you’ve walked into. So, how do you take all of this and apply it to your own pricing? First you must understand the effect that ending a price with a nine can have on your customers or clients.

Experiment: women’s clothing

[ba-pullquote align=”right”]The $39 item sold the best, even better than the cheaper price of $34.[/ba-pullquote]MIT and the University of Chicago conducted an experiment with prices on women’s clothing. They had three basic prices, $34, $39, and $44. Surprisingly, the $39 item sold the best, even better than the cheaper price of $34. However, they did find that sales prices that are listed by the original price can easily beat out a price ending in nine. One reason is the mind sees the first set of numbers and registers it as priced in the 30-dollar range, even when it’s closer to the 40-dollar range. Purchasing an item for $39.99 will seem more of a value than purchasing the same item for $40 even. It’s only different by a penny, but that one penny seemingly takes the price to an entirely lower level, thus increasing the value and the deal.

Customers also sometimes prefer to pay a middle price rather than either end because it can feel as though they’re getting a great deal and it’s better quality than the lowest price. Customers are looking for bargains and value, and that combination can be difficult to come by. And that’s where you and your business come into the picture.

Pricing your own services

[ba-pullquote align=”right”]Be open to change and improvement. Be open to progression.[/ba-pullquote]When pricing your services, consider offering a few price points and end them with a nine for good measure. You may find that your most popular service is the one priced right in the middle. Don’t feel as though you’re trapped once you choose your prices. You can always switch them if they’re not giving you the response you’re looking for. Be open to change and improvement. Be open to progression. That’s when you’ll find success and reach your professional goal.

The American Genius Staff Writer: Charlene Jimenez earned her Master's Degree in Arts and Culture with a Creative Writing concentration from the University of Denver after earning her Bachelor's Degree in English from Brigham Young University in Idaho. Jimenez's column is dedicated to business and technology tips, trends and best practices for entrepreneurs and small business professionals.

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13 Comments

13 Comments

  1. Lane Bailey

    July 6, 2012 at 10:53 am

    The problem with that is real estate search. I find that most consumers search with round numbers… like $100k to $125k. Pricing at $99,999 (or even the popular $99,900) means that the house is missed by a large percentage of consumers. The other thing to keep in mind is that were aren’t talking about a pair of pants, or even a fridge. We are talking about a house. The study specifically focused on a blouse around $40. That is a LOT different than a house that might be several hundred thousand dollars. What do you think?

  2. Mike Schmidt

    July 6, 2012 at 10:56 am

    9 has halways been my number. Born on the twenty-9th, married on 9-9-81 @ 9am. Number nine, Number 9, Number n9ne…

  3. Goodcleanliving

    July 6, 2012 at 11:03 am

    @AgentGenius It doesn’t work in real estate. Cheapens listings and dodges important Boolean search basis. Counter intuitive.

  4. DanielBates

    July 6, 2012 at 1:06 pm

     @Lane Bailey By the same logic that the listing misses the $100-125 range, doesn’t it fall into into the $75-100 range? Wouldn’t a good real estate agent search a larger range for their client anyway? 
     

  5. Lani Rosales

    July 8, 2012 at 8:17 pm

    i was born in 81. do i get a prize?

  6. Mike Schmidt

    July 8, 2012 at 9:38 pm

    You are a prize, but yes.

  7. Lani Rosales

    July 8, 2012 at 11:41 pm

    i sense sarcasm, Schmidty

  8. Mike Schmidt

    July 9, 2012 at 10:26 am

    Never.

  9. Mike Schmidt

    July 9, 2012 at 10:27 am

    And you really are. My days would be less interesting without your posts.

  10. Guyn22wun1

    July 9, 2012 at 1:21 pm

    @DawnaDavies https://t.co/xyjDyodw

  11. Nanette

    July 9, 2015 at 11:19 pm

    $39.99 vs $40.

    More like the businesses think that We, People are stupid and can't do math.

    • Lani Rosales

      July 10, 2015 at 12:04 pm

      Nanette, you're totally right, and since publication of this story, more research has been done that shows that our brains have been rewired to mistrust non-rounded numbers. The major exception is real estate, because of how syndication works (someone thinks they don't want anything $150k or over, so they limit search to under that, making Realtors price homes at $149,999 to be included in said search).

  12. Pingback: The Pricing Power of 9: Does it Work? - PayMotion™

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Business Marketing

Restaurant chains are using COVID to masquerade as indie food pop ups

(BUSINESS MARKETING) Applebee’s and Chuck E. Cheese appear on delivery apps under aliases. Is this a shifty marketing scheme or a legitimate practice?

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chuck e cheese pizza

Restaurants have pivoted hard to stay alive during dine-in shutdowns due to the coronavirus pandemic. Some are selling grocery items like eggs, flour, and yeast (check out the pantry section at the Brewtorium!) while others have created meal kits so families can cook up their restaurant favorites at home.

Meanwhile, a few large chains have been busted for re-branding their kitchens to sell more meals. A reddit user in Philadelphia reported that they ordered pizza from Pasqually’s Pizza & Wings thinking it was a local business they had yet to try, only to learn it shared a kitchen with Chuck E. Cheese. As it turns out, Pasqually is a member of Munch’s Make Believe Band, the terrifying mascot band led by murine bad body Chuck E. Cheese. Pasqually is the confusingly human drummer (and Italian pizza chef?), joined by lead canine guitarist Jasper T. Jowls, sweetheart chicken Helen Henny on the tambourine and vocals, and the dinosaur? Closet monster? D-list muppet? Mr. Munch on the keys.

Though this inter-species band should be disturbing enough for us all to rethink our childhood memories of Chuck E. Cheese (let’s be honest, Disney World should be the only place allowed to have adults parading around in giant mouse costumes) what’s more upsetting is the competition it creates with locally owned restaurants. In West Philadelphia, there is another restaurant called Pasqually’s Pizza.

Chuck E. Cheese is not the only restaurant re-branding to save their hides. Applebee’s has launched a “brand extension” called Neighborhood Wings. Customers can order larger quantities of wings (up to 60!) from Neighborhood Wings, but not Applebee’s. You know, for all of the large parties people have been hosting lately (thanks COVID-19).

This restaurant run-around is further evidence of the noise created by third party delivery apps. GrubHub, Postmates, and others have been criticized for taking huge commissions from already low-margin restaurants, and providing little added value to profitability and industry worker wages. Using these platforms as a means to build shell restaurants for large national chains is just another example of third party apps doing a disservice to both its clients and customers.

Of course, Applebee’s and Chuck E. Cheese are franchises. If one wanted to go out on a limb for these brands, it could be argued that they are indeed ‘local’ businesses if their owners are local franchisees. The third party apps are simply another platform for businesses to gain a competitive edge against one another within a specific customer segment. Furthermore, consumers should hold themselves accountable for their patronage choices and doing their due diligence when investigating new pizza and wings options.

Nonetheless, it behooves all of us in this pandemic to get to know our neighbors, and build relationships with the small businesses that are the lifeblood of a community. Restaurants exist thanks to local customers. Try placing your order directly on their website, or give them a call. I am a restaurant worker, and I truly am happy to take your order.

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Business Marketing

Restaurants might actually lose money through Grubhub and similar services

(BUSINESS MARKETING) Restaurant owners are asking themselves if third-party food delivery apps are nothing more than a good, old-fashioned shakedown.

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grubhub site

If you haven’t seen the GrubHub receipt that has everyone outraged, you probably should. It exposed the food delivery apps for their unreasonably high commissions and excessive charges to the restaurants (on top of the changes to the consumer).

Many people, in an honest attempt to support local restaurants while staying home and safe these days, have started ordering out from their favorite small, local eateries. And they should! This could be the lifeline that allows those restaurants to survive being closed for upwards of a month. However, if they order through a third-party food delivery service, they need to know that a good chunk of their money goes to the service, not the local business. Plus they are paying extra for the service.

It’s a big bummer, to say the least, a bamboozle some might say. Why would restaurants agree to use these services at all, then, if they aren’t beneficial? Well, they initially served the purpose of helping smaller restaurants and food trucks sell to a wider customer base without having to incur the cost and manage the logistics of offering delivery. Not all of the charges are immediately apparent, either, although I am sure they are in the business agreement.

GrubHub, DoorDash, Postmates, UberEats all charge eateries a commission between 15%-30% to even work with them. This is for the most basic level of service. When GrubHub, for example, wants to stimulate more sales, they may offer a deal to consumers. This could be a dollar amount or percentage off of a customer’s order or free delivery.

Everybody loves a deal, so these promotions are effective. They drive more sales, yay. The restaurants, however, incur the full cost of the promotion. You would imagine GrubHub would share that cost, but no, they don’t. If that weren’t unscrupulous enough, GrubHub then charges the business the commission on the full, not discounted, price of the order. Unctuous, right?

Sure, restaurants have to opt in for these specials and other promotions the third-party apps are marketing, so they know there’s a fee. Yet, if they don’t opt in, they won’t appear as an option for the deal in the app. It’s deceptive, feels like a bit of extortion to me. All of these delivery apps have some sort of similar way to rack up fees. For a mom-and-pop food truck or restaurant, the commissions and fees soon eat away at the already small profit margins restaurants usually have.

It’s simply wrong, so wrong. But wait, there’s more! Another nasty, duplicitous practice GrubHub (specifically GrubHub) has implemented, with Yelp’s help, is to hijack the restaurant’s phone number on Yelp. This means if you look up your favorite restaurant on Yelp, and call in an order from the Yelp platform, your call will actually go to GrubHub instead. And get this–they charge the restaurant even if you pick up the order yourself, not only for delivery.

These third-party companies have even started buying up domain names similar to the restaurants to further fool patrons into ordering through them. They also have added restaurants to their platforms, even if the restaurants haven’t agreed to work with them. They seem willing to do anything to get a cut of restaurants’ hard earned dough (and ours). Loathsome! How are these scams even legal?

It happened to me recently. I kept trying to order for pickup at the restaurant, but somehow the order kept going through GrubHub. Bamboozled!

RVB bamboozled

This boils my blood and breaks my heart for these restaurants. In my other life, I am a blogger for a hyperlocal blog whose sole purpose is to highlight, celebrate, and promote local everything. I’m also the internal marketing chair for the Austin Food Blogger Alliance, where we work with local restaurants, distilleries, breweries, and such to promote them and help raise their visibility in the community.

I only bring this up, because I’ve sat with these restaurant and food truck owners, listened to their stories, seen the fire in their eyes as they talk about their recipes. They’ve regaled me with stories of how they got started, what inspires them, and when they had their first successful day. It’s delightful to see the intensity of their enthusiasm for sharing good food with people and how much of themselves they put into their restaurants.

In the original post that lifted the curtain on this shady practice, the Chicago Pizza Boss food truck owner Giuseppe Badalamenti, says the money he got from his GrubHub orders was “almost enough to pay for the food.” Badalamenti had participated in some promotions, which admittedly reduced his cut dramatically, yet the whole premise came as a shock to customers who have been spending their dollars to keep these local businesses afloat. Then here comes the third-party apps, poking a hole in the floaties.

It comes across as downright predatory. Thousands of people have sworn off these apps in favor of calling the restaurant directly for pickup if you are able. This way, you ensure the business you want to support gets the full bill amount. You can get the restaurant’s number directly from Google Maps or the business’s social media or website. This is the best way to help your favorite places stay in business.

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Business Marketing

TikToks new augmented reality ads seeks new audiences

(BUSINESS MARKETING) TikTok product developers hustle to roll out a new augmented reality brand effect to compete with Snapchat and Instagram.

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TikTok is getting ready to launch a new ad feature to level the playing field with Snapchat and Instagram. The unofficially named “AR brand effect” will allow TikTok users to incorporate augmented reality brand advertisements in their videos. The ads will create visual effects that interact with the filmmakers’ physical environment as if it exists in real life. The ads will include music that can be played over the film.

TikTok also offers an ad product called Brand Effect, a 2D advertisement filter that users can add to their videos. The in-house product development team at TikTok created this feature for a reported cost of $100,000 according to Digiday.

Snapchat already has its AR brand experiences called the Sponsored Lens and Word Lens, which allow brands to create augmented reality filters to advertise via Snapchat’s users and their interactions with friends.

Snapchat charges anywhere from $50 to $500,000 for augmented reality advertisements. The lower tier starts with a 10-second ad between videos that users can choose to “swipe up” and interact with. The higher tiers get advertisers a day-long spot with a Sponsored Lens.

Though the efficacy of this advertising strategy appears to be hit-or-miss, the creative opportunities for advertising to a wide audience is attractive enough to keep this product development relevant. TikTok and its Chinese counterpart Douyin clocked in two billion downloads in the month of March. Its users skew young with 41% between the ages of 16 and 24, and its global following boasts 800 million users worldwide.

TikTok is moving with adept agility to roll out new products to keep its increasingly large user base engaged. “They are doing it a lot quicker [than competitor social media platforms],” media agency Starcom told Digiday. “Their ability to scale and move forward is frightening, really. If they get it right they’re going to be a huge player in the next six months to a year.”

TikTok is also working on new ad products that allow advertisers to connect with prominent influencers. With the future of stay-at-home orders looking to turn into an interminable cycle, it will be telling to understand how these advertising strategies will effect e-commerce and digital brand experiences.

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