Why charging $12/year converts higher than $9.99
bothsidesofthetable.com
bothsidesofthetable.com
Maybe people see the .99 and are trained to think "99 cents is a marketing plan to make me think it's cheaper than it is", thus causing it to have the opposite effect?
Maybe people see $9.99 as a generic price, implying it was picked fairly randomly, whereas $12 is a slightly odd number to chose, implying that it was carefully picked as a price that gives users good value? (It would have that effect on me - $9.99 suggests they haven't worked out how much they need to charge me to make a profit, and just picked a rounded number that looks normal.)
I'd like to see $12 compared to $14, compared to $11.99, compared to $24, compared to $20.
Maybe $9.99 would have converted more if they sold it as "That's less than a dollar a month!"
Why? Because it's been translated into "a beer a month", as someone initially said that surely people derived value such that if they met me once a month they'd get a beer in for me... and lo, that's exactly what people started doing online. Prior to this comment I had real trouble pulling in any donations, now people buy the servers and I a beer each month (via £3 donations).
And in case anyone is wondering, average price of a pint in the UK is £2.80, and in London where the forum is focused it is £3.30. http://www.pintprice.com/region.php?/United%20Kingdom/
My thought on this a while ago: People have to be able to visualise it in a human way to them.
They can visualise a pound coin or dollar bill and say, "That's not much", and they can visualise a pint and think "It's the courteous thing to do". They can't visualise 67p very well at all.
In my experience we typically do round dollar amounts and drop the ".00", but maybe that helps explain why 9.99 loses to 12. How would 10 vs 12 do?
Can you divide 9.99 by 12 in your head? How long would it take? How sure would you be of the answer after 1, 2, 3 ... 5 seconds?
In that impulsive fraction of a second that you have the user about to click the button and they are battling within themselves if they can do the calculation then it increases the chances that the "buy" side will win. Being able to do the calculation easily probably also gives a reflection of friendliness and ease onto the entire rest of the service as well.
However, if I did care about how much $9.99/year is each month, rather than even trying to be slightly accurate, I'd round it off as "less than a dollar a month" and go straight ahead. That extra 17c/month doesn't make a difference to me.
(Obviously both my calculations speed and the amount I care about price differences when talking about that amount of money isn't neccesarily equal to that of other, possibly most other, potential customers.)
I am pretty sure it's because of that, very simple, people like simple. I like simple.
Seems to be intuitive enough to happen subconsciously.
The other price points just appear as one fixed sum in the mind, which is much less likely to be spent on a whim.
When someone quotes the price verbally $9.99 it's longer than $10, so sounds bigger.
Also, $9.99 sounds like they are embarrassed that it's that much and they have to trick you into paying more than you thought you were.
In most US states, the listed price isn't the amount that the customer actually pays. In most retail establishments, sales tax isn't included. In most online sales, there's some shipping and handling fee.
As a result, even a "round number" price ends up being something like $12.31.
There are a few things with different/additional taxes, but generally tax is pretty transparent here, so prices are usually inclusive of tax.
Wondering - how do you feel about gas prices? Do you support advertising airline tickets net of 30-50% surcharges so you can know exactly how much of your ticket goes to fuel, airport charges, taxes, and "fees"? And for the other side of the coin - what about not being reminded exactly how much value you got out of the government every time you drive down a road?
Doing a little mental math is an awfully small price to pay for a little more transparency. Having it on a receipt, although good, doesn't quite cut it because most people will never look at one. I believe it to be important for every person be in tune with the cost of government.
> Wondering - how do you feel about gas prices?
Good that you mention that because I don't like the hidden taxes in gas prices and that's precisely the point I'm making. They can up the tax rates on gas here and no one would know the difference because it's built into the price.
All I'm suggesting is that we have very clear transparency in taxes and make sure everyone knows the cost; don't hide them.
> Do you support advertising airline tickets net of 30-50% surcharges so you can know exactly how much of your ticket goes to fuel, airport charges, taxes, and "fees"?
I'm not talking about surcharges; fuel, airport charges, and fees are nice to know but have nothing to do with taxes so have nothing to do with my point. However, they are nice to have itemized.
As for the taxes: yeah, I would like them clearly separated from the advertised price. It's annoying but are you seeing the pattern yet? Taxes that are hidden away in the price tend to be ridiculous and easily increased without the average person noticing. I'm fine with taxes but this isn't what I would call transparency and that's a bad thing.
[Side note: this wouldn't be so messy if we didn't have absurd taxes. "Sept. 11 Security Fee"? Why isn't that a service charged to the airport/airlines? Oh, because then it would have to be reasonable and the airlines would simply price their tickets with this cost in consideration and the TSA wouldn't be spending millions on privacy-invading machines that don't improve security. But they're the government and can just charge the passengers directly and when they need more money, instead of having to justify it to a for-profit company as actually improving security, they can do whatever they want and increase the tax.]
> And for the other side of the coin - what about not being reminded exactly how much value you got out of the government every time you drive down a road?
I suppose this question is because you think I object to taxes; I don't. I'm fine with them but with as much transparency as possible.
> I suppose this question is because you think I object to taxes; I don't. I'm fine with them but with as much transparency as possible.
I'm not sure I follow. You want transparency for government revenue and for every person to be in tune with the cost of government. Do you think it is important for people to be in tune with the expenses of said government? You could easily make the claim that explicit transparency in terms of how much money is spent on $government_service would be beneficial (true cost of "free" roads, money spent on each military base, etc). Sure, you could look it up in the budget, but most people will never look at one.
The sticker price is the actual price paid (including tax), but the receipt shows the itemised pre-tax price, with tax added on at the bottom.
Price elasticity testing is so crucially important and I consume everything I can find about rationality vs. the seeming randomness (particuarlly for digital products).
Even this single morsel tying rationality of consumer mind-set of $1 per month is interesting.
If you like articles about pricing, I read a really good one last night: http://onstartups.com/tabid/3339/bid/37737/Secrets-Of-Freemi...
Care to share any good articles you have read recently?
I had a similar idea: help people establish a frame of reference. Alas, I got too busy to actually go live with it.
http://news.cnet.com/2100-1017-245631.html
One suggestion is to have your pricing page show a random price, but after the user clicks "yes please" you tell them immediately that "actually, we are having a discount today to $8", telling them the lowest price of the bunch. The danger with this is that if people find out about it, it could taint your test as they know that the displayed price is not the price they will be charged at the end.
I'd be interested to hear if people have any other good ways to tackle this. The only things I can think of ad extra variables to the equation (tainting the a/b test) e.g.: write "limited time offer" next to the cheaper prices, or run the different prices on different days.