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Do Rounded Prices Sell More Products?

Posted by Ngan Ton on May 30, 2018 11:00:00 AM
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There will be instances where the magic number 9 (as mentioned in How to Price Your Products: A Guide for Ecommerce Retailers) may not be so magical. Research indicates that consumers process pricing information differently for round numbers (e.g. “3") versus non-round ones (e.g."3.99"). So which price format is best for you to drive a purchase? The answer is not quite that straightforward.

Monica Wadhwa and Kuangjie Zhang, assistant professors of marketing at INSEAD and at Nanyang Business School respectively, set out to find the answer.

They found that consumers use feelings to process round prices and reasoning to compute non-round prices. This means the best price format for your business depends on what products you offer. Is your business more geared toward emotional stimulation or practical applications?

For example, products geared toward entertainment or luxury (emotion) can benefit more from rounded prices: price a handbag at $499 instead of $499.99. However, for purchases with a practical application such as a phone charger, use $28.99 instead of $29.

If your product seems to fall into the grey area, consider one of the experiments the researchers conducted where participants were given camera options for a family vacation (leisure) and for a class project (practical). The participants chose rounded prices for leisure and non-rounded prices for practicality.

With that in mind, understand whether consumers see your offer as a feel-good purchase or a utilitarian purchase.


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