[Pricing Nugget #045] Do You Like Numbers? I Have the Right Price For You.

Do you like numbers? Do you like to do calculations? And do you feel comfortable with numbers in general?

Why I'm asking?

We will find out today.

Are you a numbers person? Do you like to do simple calculations? And you love numbers in general? Why does it matter?

Let us look at the price of $17.99. Prices often end in 99, as we know.

How do customers perceive this price?

Usually, they break them up into two pieces. In the symbolic representation, they see in $17.99 two parts.

The first part is “$17”, the second part is “99 Cents”.

How do customers perceive these number blocks?

If customers are less numerate, they look at these blocks individually and tend to anchor on the first part, the base. They would encode the price as "$17 and a little bit more."

On the other side, more numerate people would consider the whole number "$17.99", and they would frame it as "$18, the next neighbor minus one Cent."

Why does it matter?

It matters for the following reason: People can process some numbers more fluently than other numbers, and thereby people like these more fluent numbers also more than other numbers.

For example, researchers found out that most people like "16" and "18," and the majority do not like "17" and "19."

If customers look at $17.99, the less numerate customers would consider $17.99 as "$17 plus a little bit more," and more numerate customers would consider it as "$18 minus $0.01."

Both customer groups would like the price differently.

Most less numerate people would not like this price too much because they look at the 17, and people do not like 17 too much in general.

And the majority of more numerate people would like the price because they consider it as 18 and 18 is more fluent than 17 and, therefore, it's more likable.

What did we learn today?

Today, we learned that customers perceive prices differently, and it depends on how numerate your customers are; how much do they enjoy dealing with numbers?

How do you find out what the majority of your customers prefer? 

You can look at demographic profiles. For example, research shows that educational status is positively correlated to numeracy and enjoying dealing with numbers.

But my personal hypothesis is that it also depends on the product and service that you are selling. To some products, customers are attracted that like numbers. To other products, they might not enjoy numbers too much.

For example, if you are selling bending machines in a B2B context, you might cater to a different part of your brain than if you are selling a yoga retreat in Bali.

It might be the case that the product and service that you are selling preselect (or self-select) the kind of customers that you attract.

Maybe, B2B buyers are more likely to be “left-brain” customers who are more analytical and numerate. So, for this kind of product and service, a fluent neighbor effect is also more effective.

Customers for a Yoga retreat might be “right-brain” customers who tend to be creative and (might be) less numerate. In this case, a fluent base effect could be more appropriate.