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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

What skills do marketers need to survive the AI takeover?

(MARKETING) Quality marketers are constantly evolving, but getting your head around artificial intelligence can be a challenge – let’s boil it down to the most relevant skills you’ll need.

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When Facebook and Twitter were born, a new era of social media was ushered in, opening the gates for new areas of expertise that hadn’t existed before. At first, we all grappled to establish the culture together, but fast forward a decade and it is literally a science with thousands of supporting technology companies.

So as Artificial Intelligence (AI) takes over marketing, doesn’t that mean it will replace marketers? If you can ask your smart speaker in your office what your engagement growth increase was for your Facebook Page, and ask for recommendations of growth, how do marketing professionals survive?

Marketers will survive the same way they did as social media was introduced – the practice will evolve and new niches will be born.

There are 7 skills marketers will need to adapt in order to evolve. None of these are done overnight, but quality professionals are constantly grooming their skills, so this won’t be stressful to the successful among us. And the truth is that it won’t be in our lifetime that AI can quite process the exact same way a human brain does, even with the advent of quantum computing, so let’s focus on AI’s weaknesses and where marketers can perform where artificial intelligence cannot.

1. Use the data your new AI buddies generate.

In the 70s, the infamous Ted Bundy murders yielded the first case that utilized computing. The lead investigator had heard about computers and asked a specialist to dig through all of their data points to find similarities – a task that was taking months for the investigative team. After inputting the data, within minutes, they had narrowed their list of suspects from several hundred to only 10.

We’re not dealing with murderers here in the marketing world (…right, guys?), but the theory that algorithms can speed up our existing jobs is a golden lesson. As more AI tools are added to the marketplace to enhance your job, experiment with them! Get to know them! And continue to seek them out to empower you.

Atomic Reach studies your content and finds ways to enhance what you’re delivering. CaliberMind augments B2B sales, Stackla hunts down user-generated content that matches your brand efforts, Nudge analyzes deal risk and measures user account health, and Market Brew digs up tons of data for your SEO strategy.

See? Independently, these all sound like amazing tools, but call them “AI tools” and people lose their minds. Please.

Your job as a marketer is to do what AI cannot. Together, you can automate, do segmentation and automation, beef up your analytics, but no machine can replicate your innate interest in your customers, your compassion, and your ability to understand human emotions and predict outcomes effectively (because you have a lot more practice at being a human than the lil’ robots do).

2. Take advantage of AI’s primary weakness.

As noted, you have emotions and processes that are extremely complex and cannot be understood by artificial intelligence yet. Use those.

How? Compile all of the data that AI offers and then strategize. Duh. AI can offer recommendations, but it cannot (yet) suggest an entire brand strategy. That’s where you come in.

And more importantly, it cannot explain or defend any such strategy. One of the core problems with AI is that if you ask Alexa a question, you cannot ask how it came up with that information or why. This trust problem is the primary reason marketers are in no danger of being replaced by technology.

3. Obsess over data.

AI tools are young and evolving, so right now is the time to start obsessing over data. What I mean by that is not to use every single AI tool to compile mountains of useless data, but to start studying the data you already have.

The problem with new tools is that marketers are naturally inquisitive, so we try them out and then forget they exist if they didn’t immediately prove to be a golden egg.

Knowing your current marketing data inside and out will help you to learn alongside AI. If you aren’t intimately familiar, you won’t know if the recommendations made through AI are useful, and you could end up going down the wrong path because something shiny told you to.

Obsess over data not by knowing every single customers’ names, but be ready to identify which data sets are relevant for the results you’re seeking. A data scientist friend of mine recently pointed out that if you flip a coin five times and it happens to land on tails every time, AI would analyze that data and predict with 100% certainty that the sixth flip will be tails, but you and I have life experience and know better.

Staying on top of your data, even when you’re utilizing artificial intelligence tools will keep you the most valuable asset, not the robots. #winning

4. Don’t run away from math (no wait, come back!)

One of the appeals of marketing is that math is hard and you don’t need it in a creative field. But if you want to stay ahead of the robots, you’ll have to focus on your math skills.

You don’t have to go back to school for data science, but if you can’t read the basic reports that these endless AI tools can create, you’re already behind. At least spend a few hours this month on some “Intro to Data Science” courses on Udemy or Coursera.

5. Content is God.

We’ve all said for years that content is king and that feeding the search engines was a top way to reach consumers. You’ve already refined your skills in creating appealing content, and you already know that it costs less than many traditional lead generating efforts and spending on content is way up.

Content can be blogging, video, audio, or social media posts. Artificial intelligence will step in to skyrocket those efforts, if only you accept that content was once king, but is now God. What is changing is how customized content can be. For example, some companies are using AI tools to create dozens of different Facebook ads for different demographics, which would have taken weeks of human effort to do in the past.

Because content is what feeds all of these new smart devices, feeding your brand content effectively and utilizing AI tools to augment your efforts will keep you more relevant than ever.

6. Get ahead of privacy problems

Consumers now understand what website cookies are, and know when they’ve opted in (or opted out) of an email newsletter, but to this point, humans have made the decisions of how these data choices are made. Our teams have continually edited Terms of Service (ToS), all done not just with liability in mind, but to offer consumers the protections that they want and have come to expect.

But AI today doesn’t have morals, and consumer comfort is not a factor unless humans program that into said AI devices. But it still isn’t a creature of ethics like humans are. Ethical challenges going forward will be something to stay ahead of as you tap into the AI world. Making sure that you know the ToS of any tool you’re using to mine data is critical so that you don’t put the company in a bad position by violating basic human trust.

The takeaway

You’re smart, so you already knew that the robots aren’t taking your job, rather augmenting it, but adding AI into your marketing mix to stay ahead comes with risk and a learning curve. But seeing artificial intelligence for what it really is – a tool – will keep your focus on the big picture and save your job.

This story was first published in October 2018.

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Business Marketing

7 ways Instagram Stories can get people pumped about your brand

(MARKETING) Instagram stories are widely used, so why shouldn’t marketers get in on the Insta-story action?

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Instagram

Instagram Stories long ago surpassed Snapchat at it’s photo-sharing joy, and has found to be a great place to build brand awareness and build your customer base.

Here are a few ways that you can use stories to get people excited about your brand, products, and service.

1. Share the story of your business

Showcase the creation of a product or service, or share something (legal and fun) that your team is working on. These behind the scenes productions humanize your brand and can really get people excited about it. Check out what Union Fare does!

2. Preview live broadcasts

Are you doing a Facebook Live or WebEx demonstration? Use Instagram Stories to tease and generate some excitement or pull attendees from one social media platform to the other.

3. Showcase your stuff in action

Whether it’s demonstrating an application, showing off a recipe, or showcasing an outfit, you can use stories to show what the end result of a product is and help them generate ideas on how to use that stuff! Because Instagram Live can be done spontaneously, you can show authentic, non-scripted demonstrations easily.

4. Brag time

When you support a brand, you get excited that you are a part of their wins. Share relevant milestones (subscriber counts, new products, new revenue, new contracts, new products, etc.) with your base. This helps build connection with your base.

5. Countdowns and giveaways

You can use stories to facilitate ways to get people excited about upcoming giveaways or new launches. Unlike static marketing, the use of countdowns can really get people emotionally excited and build anticipation for new products or services. You could also use stories to give special sales or unique giveaways that give a more “exclusive” feeling.

6. “Takeovers” from influencers or partnerships

If you are working with a promoter or influencer, you can have them generate content to send them over to you to use their voice to target your audience. The influencer can send you pictures and videos that you upload yourself, rather than handing over your account username or password (like with Snapchat). This is a great way to work with someone who already has a following that can help you expand your service or product reach.

7. Create unique content

Odds are, especially for smaller businesses and new entrepreneurs, you don’t have a lot of time to invest in production value for other advertising. Instagram Stories with the use of stickers, paintbrush, and text can be a great place for raw, but still polished content that has a one of a kind feel. Familiarize yourself with the tools, and don’t be afraid to get artsy.

Make Instagram work for you

Instagram is constantly adding new features, so make sure you stay tuned for updates and play around with those features often. For example – Instagram stories can rewind or being hashtagged. Or use the eraser brush to do slow teases or product reveals.

Given that users can now bookmark content as well, you can create demonstrations or examples and give your audience a quick reference to your content. Get learning, check out stories, and start building those unique, intimate, and creative engagements with your consumers.

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Business Marketing

It’s okay to rebrand: 10 major brands you wouldn’t recognize by their original name

(BUSINESS NEWS) These 10 top brands underwent a major rebrand to become the household names you know today.

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For a struggling company, sometimes a redesigned logo or the introduction of a new product does the trick. Other times, an entire new brand identity may be the best bet. Of course, it’s important to work to make sure you’ve found the right name for your brand before putting time and resources into making your brand take off and rebranding can be scare.

But if the following list shows us anything, it’s that even some of the biggest players out there realized their name was a roadblock on their path to success.

Here are 10 household name companies that definitely made the right choice in rebranding.

1. Backrub to Google (1997)

You’ll be hard-pressed to find anyone who isn’t familiar with the Google name and iconic multicolored logo, but for almost a year the search engine was called BackRub. When founders Larry Page and Sergey Brin needed to expand beyond their original Stanford University servers, the chose to swap out the name too. You may know that the name was inspired by the number “googol,” but it was actually a spelling mistake when registering the domain, not a creative choice, that led to its current name.

2. Lucky Goldstar to LG (1995)

The LG name has a long history beginning with the merge of two South Korean companies, Lucky and GoldStar in 1958. The two companies produced hygiene products and consumer electronics, respectively, and operated as Lucky-Goldstar for over thirty years. In order to better compete in the Western market, the company name was shortened to LG, leading to the “Life’s Good” tagline and clever smiling face logo.

3. Brad’s Drink to Pepsi (1898)

For a short five years, the popular soda went by the less catchy name Brad’s Drink. The original name came from inventor Caleb Bradham’s last name, and the current name comes from “pepsin,” the enzyme that helps digest proteins in food. The switch was definitely a good move, but Pepsi sounds a lot cooler when you don’t know where the name comes from.

4. Sound of Music to Best Buy (1983)

In 1983, Sound of Music was a humble chain of seven electronics stores specializing in high fidelity stereos. Today, there are over 1,000 locations nationwide, and stereos are just one of a long list of electronics for sale. As the company grew and their merchandise offered expanded, the switch to Best Buy was a great, necessary transition.

5. Blue Ribbon Sports to Nike (1971)

In one of their first ad campaigns after adopting the new name after the Greek goddess of victory, Nike stated “There is no finish line.” In a direct response to their old name, Nike suggested their bright future ahead and prospective goals. Today, the name and swoosh logo are one of the most recognizable brand identities around the world.

6. Pete’s Super Submarines to Subway (1968)

In 1965, Subway founder Fred DeLuca borrowed $1,000 from his friend Peter Buck. To show his gratitude, DeLuca named his first sandwich shop after Peter. The pair went on to run the shop together, but changed the name after finding little success under the original moniker. Now, Subway is the the largest restaurant operator in the world, with 44,852 restaurants in 112 countries.

7. AuctionWeb to eBay (1997)

This name change came from outside forces, when founder Pierre Omidyar realized media coverage of his auction site frequently referred to it as eBay, the name of his umbrella company. The original eBay Internet housed four sites: AuctionWeb, a travel site, a personal shipper site, and a site about the Ebola virus. Only the first had much success. As a result, Omidyar officially changed the name to the one people already were starting to call it.

8. Phoenix to Firebird to Firefox (2004)

The free, open-source browser went through a series of subtle name changes before finally hitting the jackpot with Firefox. When it first appeared for public testing in September 2002, the name was Phoenix, but less than half a year later a trademark dispute began with BIOS manufacturer Phoenix Technologies. The name was then tweaked slightly to Firebird, another name for the mythical phoenix. More naming disputes took place over the next year, and in February 2004, the name Firefox was finally chosen.

9. Jerry’s Guide to the World Wide Web to Yahoo (1994)

Another search engine that started at Stanford, co-founders Jerry Yang and David Filo were still PhD students when they started what we now know as Yahoo. The root of the original name is obvious, while the current one stands for “Yet Another Hierarchical Officious Oracle.”

10. Research in Motion to Blackberry (2013)

Research In Motion was already a success when the name was switched to Blackberry in 2013. Although the first first device to carry the BlackBerry name was the BlackBerry 850, an email pager introduced in 1999, the company didn’t officially the name of its best-known product until 2013 as part of a larger comeback plan. Unfortunately, this case shows that sometimes more than a new name is needed to bring a struggling company back to action.

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