What is the mystery behind it?
Let's demystify it....
Well ,let's get straight to the answers. The answer is that companies have been playing with you psycologically and making you to buy more than you need and spend few extra dollars. All this is done by just reducing a penny or a rupee!!!
As many of you 'bright minds' must have guessed , it is a marketing stratergy of companies. BUT HOW DOES IT WORK???
Walk around any retail space, be it a grocery store, boutique, big-box store or mall, and look at the price tag. Very quickly, you'll notice a pattern: It seems like every single price tags ends in .99 and so on.
You are choosing some products and are faced with $0.49, $1.99, $49.99, $ 99.99, etc. In psychology, they call it "effect of the digit to the left", where consumers tend to round the value down. When calculating the selling of $50 and put it in $ 49.99, the value mean, psychologically, $ 49.00,
Prices ending in 9, 99 or 95 are known as "charm prices," prices ending in 9, 99 or 95 make items appear cheaper than they really are. Since people read from left to right, they are more likely to register the first number and make an immediate conclusion as to whether the price is reasonable.
Over 90 per cent of prices end in the number 9. And the reason behind this odd phenomenon is more complex than you may think.
It's called the "left digit effect."
That quirk we collectively share of looking at a price like $19.99 and seeing it as $19, instead of a penny shy of 20.
We judge prices by the left digit.
This method of not pricing items in round numbers is also called "Odd Pricing" — referring to the resulting odd price numbers like 69 or 99 cents
Don't just scroll away. Donot you want to know when did all this start??
Well like all capitalist theories and modern business practices the likelyhood of its origin in Europe or America is high.
The practice of odd pricing has been used for for more than a century.
It's trackable as far back as 1875. At that time, a paper called the Chicago Daily News was founded. It sold for one cent.
The problem was there weren't enough pennies in circulation. So the owner of the newspaper went to the retail stores who advertised in his paper, and asked them to lower the prices on their goods by one cent.
The merchants agreed to help the paper out.
Then the newspaper owner had barrels of pennies shipped in from Philadelphia to provide the circulation of change.
At the same time, distant merchants began shipping their products to the Windy City via the new railroads, giving the local stores competition. But those Chicago store owners noticed that the odd pricing helped them undercut these new competitors.
The odd pricing actually increased sales.
Over 60 per cent of all prices in all stores end in the number 9.
Prices ending in 99 cents are powerful because we are conditioned to think 99 cents is a bargain, no matter how small the saving.
It's interesting that people don't perceive much difference in value between items priced at $20 and $25. But drop the price by one penny, and they perceive great difference between $19.99 and $24.99.
The power of the number "9" isn't confined to the cents column, either.
One American clothing retailer experimented by changing the price of a dress from $34 to $39 dollars and increased sales by over 30%.
Meaning – higher prices ending in a "9" will actually outperform lower prices – on the very same product.
The alluring thing about 99-cent pricing is that it feels like a sale price.
It's a game stores have played with us for decades.
Apple tried something too?
One day, the CEO of one major retailer felt it was time that game was stopped.
Ron Johnson's claim to fame was that he had created Apple's retail stores for Steve Jobs.
He spent 12 years at Apple, revolutionized what a computer store could be, and generated a billion dollars of revenue in only two years.
There was just one thing wrong with the plan.
It didn't work.
While there were many reasons why Johnson's new plan didn't succeed, it did reveal some truisms about retail pricing.
By removing the context for low prices, shoppers didn't know how to evaluate the new price tags. Put another way, by removing the original price and not showing the markdown price, shoppers couldn't determine whether the "everyday low price" was a good value.
So if they saw a $14 dollar shirt, they might assume it was cheaply manufactured. But had they seen a $50 price tag marked down to $14, they would have seen that as a huge bargain.
As Time Magazine noted, it also showed how irrational shoppers can be. An end table that was priced at $150 under Johnson's tenure didn't sell. Later, the table was priced at $245, then marked down to $149, and it sold out. This can be called as 'high drop gain' stratergy.
Within one year under Johnson's new plan, JC Penney sales fell 28 per cent. Revenues even dropped 40 per cent during the critically important Christmas shopping season.
JC Penney's stock dropped 55 per cent, cutting the retailer's market value in half.
In the middle of all the bad news, the JC Penney Board of Directors sent a signal to Johnson, and cut his salary by 96 per cent.
The sales results didn't get any better.
After only 15 months, Ron Johnson was fired as CEO.
The theory behind ending your price @99 actually stems from a J.C. Penney study that was done in the early 1900s in their stores. They determined that when someone saw a product that ended in 7, 8, or 9 ,there seemed to be a feeling that they were getting a deal and this created a level of urgency that then pushed them to buy.
So ,Now you know all about the mystery. So next time you are in a store ,just donot get fooled by the pricing trick.
Also ,do you think this trick works in Arab / Middle East Asia countries? Yes/No why?
Just comment below.
Really Awesome and unique article.
ReplyDeleteYes companies playing with us. Thanks for the article.
ReplyDelete