We have all heard the rumors of Charm Pricing but, does it really work? Does the power of 9 really affect buying behavior? From our research, it turns out it does work!
We analyzed over 1.5 million online stores and found stores using some form of charm pricing technique end up making 4% higher revenue than those without.
The left-digit effect (also known as left digit anchoring effect) of price has proven to have a positive impact on purchase decisions.
Our brains tend to read numbers from left to right. The left brain is more verbal, analytical, and orderly than the right brain. It’s better at things like reading, writing, logic, sequencing, mathematics and facts.
We are structured to associate 9-ending prices with sales and discounts. Most customers have a mental price band for any product. Positioning just below that level generates a degree of comfort with the purchase decision.
When a retailer uses charm prices throughout the store, catalog or website, it creates a holistic low price image for the brand. Once such an image is created, shoppers pay little attention to actual prices, or the cost compared to its competitors.
Charm prices is the most common price positioning tool in the market today. It was introduced in India nearly three decades back when shoe-maker company Bata priced its ‘Hawai’ chappals at $39.99.
In an experiment tested by MIT and University of Chicago, a standard women’s clothing item was tested at the prices of $34, $39, and $44. Surprisingly, the item sold best at $39, even more than the cheaper $34 price.
According to Rajeev Bakshi, MD, the trick works best for higher value items. “It’s known to be used more in planned purchases rather than impulse buys. So typically products like shoes, cars or durables see this kind of pricing more often but it is not common in low-value products or daily consumption items,” he says.
We can safely say that having products charm priced does have a positive impact on revenue. We believe having prices well rounded off is worth it. We find improved conversions and better brand recall as two major outcomes of using charm pricing techniques, all of which leads to improved margins.
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@2022, Sellingnomics The power of 9 @2015,Rituparna Sanyal, @2022, Charm Pricing. @ Ann Pietrangleo, Left Brain VS Right Brain