Priced at ₹99- A Century Old Marketing Sorcery

A psychology is study of mind and its functions. It can be practiced in business field to impact a consumer’s decision making and attract toward one’s product. A lot of research is being conducted in field “Marketing Psychology” to predict consumer behavior and influence it through Advertisement, Pricing, and Combos etc. We are here to talk about perhaps one of the oldest trick used by marketers by adjusting the price of a product by as small as a cent. What is the Price ❓ If you are a salesperson, this is the question you probably answer 100’s of time during the day. And to answer it with ₹ 99 or ₹ 999 is as good as ₹ 100 or ₹ 1000.

Today’s smart consumer can easily identify “what tactic you are applying”. Almost all of our customer don’t really cares about 1 rupee difference. Although this has certainly boomed off toffee business. Best example would be Pulse, Which recently showed so much sales which wasn’t even predicted (Taste was also a big factor we can’t argue that). Some shops have even started treating a toffee as a currency. Return them for a rupee next time. No one who goes out for shopping keeps an exact change. People like whole number. Especially for a small price range.

So should you keep selling your product with a 99 or a XX.99 price Tag?

The strategy is called “Left Digit effect” or “Charm effect”. Where price is deducted by a rupee to change the left digit. For example 1000 is decreased to 999 by reducing a rupee. There has been several research on this topic, you can refer to Thomas and Morwitz research in the year 2005, which concluded people will buy more item priced at ₹ 99 than a straight ₹ 100. You can blame your lazy brain, which clearly resents conflicts. It straightaway focuses on low digit count than the actual difference.

1) Research published by Kuangjie Zhang and Monica Wadhwa in a 2015 study suggested people are more inclined towards whole numbers as they are more fluently processed and encourage reliance on customer’s feelings compared to non-whole numbers, which are less fluently processed, and encourage reliance on cognition.

2) The answer really depends on the goods you want to sell. According to a research, People are often inclined to like ₹ 99 price tag for consumer and regular goods. But when they buy a Luxury or leisure items the ball rolls against it, as they are willing to pay a higher amount which somehow they relate to quality without actually using it. Why? It’s clear from para 1, For small price consumers don’t spend a lot time and rely on their cognition which tells them 2 digit 99 is whole lesser than paying a 3 digit 100 🙄. But not in the case of Luxury and expensive item, where consumer really focuses on decision making and tend to form a emotional connection with the item. This focus diminishes the “Left Digit” effect on them.

3) No one cares about small amount such as ₹ 1 when buying a luxurious item but consumer resent this price trick. Some companies have started calling it Unethical tricking customer for a change which won’t even be given to them.

4) At the end it really depends on your product, consumer base and most of all company’s image. If your product is suitable for customer than price won’t make much difference, at some point they will figure it out. Apple still uses a $999 price tag.

Why we are not arguing about ₹ 240 and ₹ 245 price difference and only focused on a 9 ending price tag like ₹ 299 and ₹ 300?

1) Our mind is complex structure and loves repetitions. For centuries a 9 ending price tag have been used to play with consumer’s brains. Hence a big difference in price tag (i.e. more than 10 rs) really doesn’t contributes in attracting customers. As long as it is a whole number such as 245 instead of 245.99 which really is annoying for you and consumers. People won’t relate it to a ₹ 1 difference but would leave their frontal lobe more confused.

2) Another reason being consumers love less digits in the price tag, as it registers in their brain faster than XX.99 (That’s why shops don’t show the price inclusive of taxes since it converts to big digit number after tax). It won’t matter much to a consumer unless a leftmost digit is changed, which in their minds is a huge deal they got out of a company’s pocket.

So Should I sell my product for ₹ 99 instead of ₹ 90?

Only you can answer that!!! 🛒

1) People are more price aware when buying small and cheaper products (No! diamonds are not included, they come under luxury) that’s why malls are more convenient, as they give consumer options and more time to think. You should definitely consider the quality, material, competition etc. and instead of increasing a price from ₹ 95 to ₹ 99, do try ₹ 89 first.

2) Do keep in mind if you increase your product price from ₹ 95 to ₹ 99, your competition can decrease their price and capture the market unless you have a monopoly. (Thanks to Chinese mobiles, now I can afford a smartphone without selling my kidneys).

3) In consumer products and regular goods quality isn’t a big factor. Price is. Keep it as low as possible.

History

Historians can’t exactly pinpoint the time when this strategy came into existence. It is predicted to have started in the late 1880’s after invention of cash registers. But a theory suggests that the price of 9 ending was used by shopkeeper in old days so that their cashiers would open the cash counter to give away the change to customer. If they opened the cash register they would be less likely to keep the amount in their pockets instead of in the register. CCTV, why didn’t you come sooner.

Additional Notes

1) In an experiment conducted by the University of Chicago and MIT, women’s clothing was used to test the left-digit effect. Prices were set for $24, $29 and $34. Researchers were surprised to find that, the items sold best at $39 even though that price was more expensive than other options. And men are wondering why their family expenses have increased!😁

2) The analog model (Dehaene 1997; al. 1981), This paper states that when presented by 2 multi-digit numbers to be compared, we assess the quantitative meaning of numbers by spontaneously mapping them onto an internal analogue magnitude scale. This numerical symbol to magnitude conversion affects

the precision of the numbers being encoded (Dehaene 1997). Their words, not mine!!

3) This theory suggests “Left-to-right processing of numerical symbols affects this magnitude conversion process and distorts the price magnitude toward the leftmost digit”. Do read this paper for more researched theory on “How the change in leftmost digit affects our buying decision”.

Conclusion

We can’t conclude about the ethical aspect of changing the price by a rupee to interfere buying decision. Today’s smart buyers are price conscious and evaluate the product based on quality, brand etc not by a rupee difference (The trick has been exposed) but there are still markets where this strategy would work. We think use this to your advantage by not using a 99 price strategy but claiming to your customer that you care about them and use no such tricks. Full transparency with customer builds trust.

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