New research: *.99 no longer optimal for prices
The blog has been quiet for a while. I can now tell you the reason for this: I've been working on an intensive research project for the last couple of months. The Inon Pricing Research Centre has partnered with three retailers and two major consumer goods manufacturers to carry out the first detailed experimental tests of consumer responses to goods at different numeric price points. Everyone knows - or thinks they know - that prices such as £1.99, £5.99 or £9.99 are optimal price points for retail goods. Customers read the first digit first, and the last two are ignored - or at least, they have much less cognitive impact. In general, consumers were thought to put a subjective value estimate of about ten per cent less on an item priced at £3.99, than one at £4.00. However, despite a wide literature on behavioural economics and marketing, and a number of papers on pricing (for example this paper from Marco Bertini at London Business School ), this effect has not been properly te...