When I was a kid, there was a store near my neighbourhood whose unique selling proposition was that all their items were sold at a penny less equating to 99 cents on the price tag.
Being young, I didn’t understand the appeal.
Who would go out of their way to save a penny at a time?
As I grew up, I started to notice this everywhere. From the clothing in retail shops to water bottles at the local grocery store.
A while back, I was looking up online courses to enroll in to improve my employability. I noticed a trend. Most of the products ended with 7’s e.g. $97.
Where did this come from?
It was rumored that the copywriter Ted Nicholas was the one who started the save-a-dollar-or-three movement when it came to online info products.
In the realm of selling items online, there is common question, which is:
“Which converts better? $9.97, $9.99 or $10.00?”
Of the three, the $10.00 is a definite no no.
This leaves us with the 7 and the 9.
If you are looking for conclusive evidence as to which converts better, there is none.
Both 7’s and 9’s work better than the 10, but there is no right answer as to which of the two is better. It is said that such an idea is either too costly or downright a-waste-of-time to test.
The more important concept to grasp as it pertains to pricing is a concept called Price Elasticity.
Simply put, price elasticity allows the seller to sell their products at different prices to figure out which will provide the highest overall returns.
If you were selling a loaf of bread for $1 and 100 people buy it, you just made $100 in revenue.
But if you were able to sell it for $3 and just 40 people buy it, you just made $120 in revenue – that’s 20% more in revenue with less than half the customers.
Having fewer but more dedicated customers also lowers the cost and time when it comes to customer service.
The verdict is out – pricing is strategic, it’s not just a matter of gross margin.
Position yourself to the highest and most optimal price point.
If the big guys can do it, why can’t you?