Tuesday, April 3, 2012

The Psychology Of Sweetspot Pricing

sweetspot marketing from Music 3.0 blog
Sometimes the price of something (like merch, for instance) doesn't matter as much as the way it's priced. As an example, which of the following 3 would you think garnered the most sales?

5 dollars

It turns out that the second one (5.00) without the "$" sign or the word "dollars" is far more effective than the other two. Researchers at Cornell University discovered that when they offered 3 different menus at an exclusive restaurant, the one that used the $ sign caused people to buy less, while the one where the $ was omitted bought more.

The reason why is that the mere presence of a dollar sign or the "dollar" word spelled out imparted a "pain of buying" experience, causing the buyer to think about the money in his or her pocket. 5.00, it turns out, is a less emotional buying experience.

Here's another one. Which of the following received more sales?


If you guessed 4.99 you'd be right. Once again, there's significant research that definitively shows that even though 4.99 is only a penny less than 5.00, in a consumer's "buying mind," they believe that they're paying 4 bucks instead of 5. That's why you've seen retailers use the ploy for what seems like forever. It really works.

But guess where else it worked big-time? If you guessed iTunes with their .99 download, you'd be right again. Steve Jobs knew what he was doing when he chose 99 cents as the music consumer sweet spot.

It's also been found that a sales price ending in a "9" is much more effective than using any other number. A study done by the University of Chicago found that when a supermarket dropped the price of margarine from 89 cents to 71 cents, sales improved by 65%. But when they dropped it from 71 cents to 69 cents, sales jumped by 220%!

So next time you're pricing your CDs and merch, consider using some of the above tricks. They've made a lot of people rich.
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