[Pricing Nugget #021] Prices, a Love-Hate Relationship

In the previous pricing nugget, we looked into why you unconsciously, almost hypnotically love a price.

Today we look into why you unconsciously also dislike a price.

Recap: The last time we learned about implicit egotism. It pretty much means: people like to be reminded of themselves and like the objects and subjects that remind them a bit more.

Implicit egotism is the reason why the birthday number effect works that we discussed last time.

But the birthday number effect is not the end of the story.

What else can you do with implicit egotism in pricing?

The Sports Team Number Effect in Pricing

The effect that we are going to discuss today is among my favorite psychological pricing effect.

But I'm biased here because I discovered this effect with a research colleague.

We hypothesized that the reminder does not need to be about oneself. It could also be about a social group that you identify with.

And it does not need to be something pleasant that you love, but it could also be something that you don't love too much (maybe even a bit hate).

What did we do?

We live here in Germany. Therefore, we ran a study in a soccer context.

There are two clubs that are well known for their rivalry, Borussia Dortmund and Schalke.

Borussia Dortmund – commonly abbreviated as BVB – has a logo with BVB 09. Schalke has a logo with Schalke 04.

So both clubs have a number in the logo that is well known to their fans and well known to the supporters of the other club.

Either club has a strong fan base that vividly supports each club. But the fans of one club do not like too much the other club.

First experiments.

We hypothesized that BVB 09 supporters like a price that ends in "09" much more than a price that reminds them of their arch-rival that ends in "04" and vice versa.

We ran a couple of experiments, and we found that if the price changed from €19.04 to €19.09, the rating for price liking and purchase intention changed dramatically.

So BVB09 fans like a price much more when the price ends in "09", and they like prices much less if the price ends in "04." You notice that although the price is higher, supporters of BVB09 like the price more. The opposite holds for Schalke 04 supporters: If the price is €19.09, they like it much less. And if it is €19.04, they like it much more.

One more experiment with real transactions.

A few weeks later, there was an open house event at TU Dortmund University. The university is located in BVB 09's hometown.

At this open house event, we set up a booth where we sold waffles with two different toppings: powdered sugar and cinnamon sugar.

We offered either flavor at a price of €1.04 or €1.09 and changed the prices half-hourly.

When the customer bought a waffle, a research assistant would hunt him down and ask her or him: "Are you a soccer fan? And if so, for which club?"

Customers were pretty confused and did not see a relationship between the price and them being a fan – even when the research assistant tried to make it very salient by pointing to the fact. This experience showcases that implicit egotism works on an unconscious level.

We found out that when the price was increased for BVB09 fans from €1.04 for cinnamon sugar waffles to €1.09, the share of topping choice doubled from 22% to 44%.

We increased the price – and you could argue that the price difference is marginal. One would expect customers to buy the topping they like more.

But not customers who were BVB09 fans: they would instead buy the topping that reminds them of their favorite club.

…and this is how we found a sports team number effect.

By the way, this is not only about sports teams.

• This is about reminding customers about a social group they associate with or identify with.
• And this is about reminding of something pleasant and reminding of something unpleasant.

Let us look into some practical implications.

1. You might know about a specific region with a specific affinity to a specific number, and you set your prices, for example, your regular or promotional prices, according to this affinity. For instance, in the San Francisco Bay area, you might let your prices end in "49" because the density of San Francisco 49 supporters is higher than in the average US.
2. Or you let your creative juices flow, and you think about numbers that are associated with something pleasant. Then you need to consider whether this is a general affinity, or can I identify customers that are very likely to share this affinity? And then, you target this customer group with regular prices, promotional prices, or discount values by setting the numbers to a value these customers should like a bit more.

This is what you could do as a retailer.