why $1.97 and not $2.00

OK, here's my thinking. Somewhat similiar to John's and I agree that testing is the route to go.

Another thing that is pure speculation on my part...A price that is just lower than bill denomination is part of the power.

For example, in the U.S. we have bills in the amount of $1, $5, $10, $20, $50, & $100. I purposely left out $2 due to it's infrequency of use.

Therefore, prices of $0.97, $4.97, $9.97, $19.97, $49.97, & $99.97 have the most psychological impact because you can pay for your purchase with a single bill. Again, pure speculation, but I've personally had such thoughts when I buy things. Even if I'm not paying cash. And knowing full well that tax is going to put me over.

But on the surface, when I'm making the buying decision, I'm getting the product/service for a price that I can pay with a single bill. Whether .99, .97, .95, etc. is better would have to be tested.

And here's the wierd thing. I personally think in intervals of $5 minimum. Again, this is probably due to being trained to accept the denomination of U.S. Bills. So, I'm no more likely to buy your offering at $8.97 than $9.97. In fact, I may be less likely. Because, $8.97 brings thoughts of more change cluttering up my pocket.

However, if 2 identical products are offered at those prices, I'll buy the cheaper one because I'm able to compare them. Once I determine that they are indeed the exact same offering, of course I'm going for the least expensive one. But as a stand alone with no comparison, I'd likely be more apt to pay $9.97.

To me personally the "power" of being able to pay for something with a single bill is not only satisfying, but also simplifying.

Maybe I'm nuts. Maybe I'm right. Maybe I'm both!

P.S.
I've heard the old logic of using decimal pricing up until $100 and then going to whole dollar pricing for anything above. Personally, I like whole dollar pricing for anything above $20. At which point, to me it doesn't make a difference whether the price is $47 or $49. As long as I don't have to think about hearing metal jingle. And as long as it's priced close enough to that bill denomination so that I can visualize that single bill in my mind. Then I know that I can get what I want with that single bill.

Its all physcological way of influencing the customer. Same thing happen in hypermarket or supermarket. For certain things, it matters especially the daily use items. I myself use to compare the price if I go for shopping. But certain thing that we only buy once a while it doesn't matter, 3 cen different is nothing.

See how well it works? They fooled you, too.

Its a proven fact that $1.97 converts better than $2.

I don't remember where but I was reading that figures with 7 in them converts better.

The guy there said $45 won't convert better than $47.

The same way I'm used to see figures like $7, $17, $27, $47, $67 and $97.

Even the big guys have there products for $1,997. Now tell me if it matter to them if they make it $1,995.

Thus I believe its the psychological power of the number 7 that makes marketers use it.

However, I use 7 in my prices since everyone else does and thats gotta be the reason most of the marketers would use $47 over $50.

- Lokesh Sharma

Yeah it the same as those infomercials that sell things for 3 easy payments of $19.95 it's still $60 (only $.15 cheaper) but people see the small number and that is what sticks in their head.

Another trick of marketers and infomercials is the price cut. You know "The regular price is $97 but for a limited time I'm offering it for $27 + extras".

It is to create urgency and convince people that if they don’t buy it now they won’t het the best price.

Just my two cents,
Tommy

I don't normally post without reading an entire thred, so If this has been already posted - just ignore me.

In the UK when buying off line the price pitch normally ends in "99". Now as I understand this, the reason is that in the days (long ago) when tills were being introduced to shops (stores) they gave out a loud ring after a transaction and when the money drawer opened. Once opened, the till operator would deposit the money and give back any change due.

The idea of the .99 was that no one could walk out of the store with goods, unless the shop owner had heard the till ring.

What that means is that the till operator could not simply take the money (if given in round figures, whether note or coin) off the purchaser, then say thank you and pocket the money, but rather, the purchaser would expect to hear the till ring (as would the store owner) and expect to get their penny, cent or whatever change.

On the Internet however, in B2B circles, we are conditioned to the "97".

Well, I hoped that you enjoyed my explanation (I believe it to be true), but if not - it ought to be!

Just my small contribution.

Regards,
Jeff Henshaw.

At least in the USA, there is definitely a series of psychological price points where you encounter resistance. Even in very large transactions.

Look through a few real estate listings. You won't find many even dollar prices, regardless how high you go on the scale.

A $200,000 house will be listed at $199,000. Why? People will tell their agent that their budget is "under $200,000". Even the programming on listing search programs is set up for "under $xxx,xxx". So if the budget is under $200k, a search won't even show the ones for exactly that amount.

Moving up an order of magnitude, a $2,000,000 house will likely be listed for $1,995,000 for much the same reason. The even numbers present a mental barrier.

@dvduval - If you're charging $30 now, I wouldn't waste time testing $30.95. I'd be more inclined to test $29.95, $34.95 and $39.95. The sweet spot appears to be just under the next price point.

Naked, unsolicited plug warning...

If you have questions or problems about pricing, grab Paul's WSO, Pricing for Big Profits.

It might not answer all your questions, but it will give you a helluva good framework to hang them on while you test for the answers...