[Pricing Nugget #050] Nice Numbers Make Perfect Prices

You are about to set a price, and you are a bit indifferent.

What kind of price do you set? It could be either 16 or 17. You are in between and wonder what kind of numbers like customers more. Is it 16 or 17? And why is that?

We will find out today.

To kick it off, let's do some math. Four plus six, what is it? Or six times four, what is the answer?

Did you really calculate it, or do you just know it?

And the reason why you just know it is because we are trained in elementary school to almost automatically retrieve the result of simple additions and multiplications.

In general, there are two ways how to solve arithmetic problems - either via reconstructive or reproductive processes.

The reconstructive processes are the rules and procedures that you apply to calculate the answer to a problem. This process is slow and reasoned.

However, there are also reproductive processes that rely on rapid fact retrieval. You see two times six, and you know it is twelve. And these rapid retrievals come from our drills in elementary school to solve simple problems.

These problems have got “ingrained in our brains, and we can rapidly retrieve the results. Therefore, sums from common addition problems from "one plus one" to "ten plus ten" and products from common multiplication problems from "two times two" to "ten times ten" should be more accessible, more fluently processed and liked to a greater degree.

Which numbers people like more?

Researchers ran a study on price liking. 

They put participants in front of a screen, gave them a keyboard, and the participants put their index fingers on the D and on the L for "dislike" and for "like" and showed them numbers from 1 to 100. And the participants had to choose whether they liked it or disliked it quickly. The results of this study are presented here…

…but to make it more accessible for you, we prepared a "nice numbers" cheat sheet for you that you can download in our new category, "Tools."

This is the 50^th Pricing Nugget, and to celebrate 🎉 this milestone, we launch a new category, “Tools," that should give you even more tangible advise on pricing.

The “Nice Numbers“ Cheat Sheet is the first tool – you find it here.

Why is that that customers like specific numbers more? Let's look at 16.

16 can be either the result of a simple addition or multiplication, such as eight plus eight or four times four.

Research shows, and we cover this in Pricing Nugget #45, that customers like this number more. And given that prices come with odd prices, like 15.99 or 16.99, it depends a bit on which part of the odd number customers put more focus on. For example, $15.99 is preferred by numerate people because they round it up and consider it as $16, and for less numerate people, they look at $16 and cut off the rest.

What else can we do?

You could also make the simple multiplication a bit more salient. In this experiment, we have two advertisements for a promotion.

You get four small pizzas with up to six toppings for only $24. The other group saw this advertisement: You get four small pizzas with unlimited toppings for only $24.

In the first advertisement, the multiplication of the 24 has been made more salient. FOUR small pizzas up to SIX toppings, four times six equals 24. The other group saw only four small pizzas for $24.

Asking for their offer evaluation, customers evaluated the first offer as significantly higher than the second one. This shows that the liking of numbers also impacts the liking of the price.

The crazy point here is that unlimited toppings are superior to six toppings. But making this multiplication more salient, customers like the first advertisement more.

What did we learn today?

Today we learned that people like specific numbers a bit more than others. And customers like to see these nice numbers in the prices. They like the prices that include these numbers a bit more.

Why is that? Because elementary school drilled us on solving basic arithmetic problems in a way that the results are automatically retrieved and the results are more fluently processed.

With a "Nice Numbers" Cheat Sheet including these numbers from 1 to 100 and knowing which numbers customers like more, we are well equipped to apply this principle and effect in our own pricing.