It’s official: A sucker is born with every 99-cent sale.
A new consumer study by Colorado State University shows we’re often tricked by the left-hand digit in a price, regardless of the actual price difference between products.
When CSU asked students to choose between two pens priced at $1.99 and $3.00, nearly all chose the cheaper pen. But when the prices were changed to $2.00 and $2.99, nearly half chose the more expensive pen.
CSU researcher Ken Manning then picked a more highbrow scenario, telling students they were on a trip and choosing a gift to take home. He tried a new trick: rounding off.
When he and Washington State University partner David Sprott priced gifts at $29.99 and $39.99, three-quarters of the students took the cheaper one. When they rounded the price to $30 and $40 — same price gap — only half took the cheaper gift.
“As humans, we want to simplify,” said Manning, a professor of marketing. “And in some cases, that can work against us.”
Enthusiastic consumers often ignore all the pesky numbers in the middle and on the right, just to focus on the left. That’s how, for example, a man can shop for a new car at $27,999 and go home to tell his wife he’s picked one for “about $20,000,” Manning said.
There’s a good explanation for the self-deceit. Take the gift example: When it’s $29.99 vs. $39.99, the buyer sees a 50 percent increase between a 2 and a 3, decides it’s too much and goes cheap.
When the prices are $30 vs. $40, the buyer sees only a 33 percent increase between the 3 and the 4 and decides, what the heck, take the pricier gift, Manning said.
Manning’s advice for retailers is to think carefully about their profit margin on an item. A grocery store, for example, makes a higher profit on its cheaper, private-label cereal. If the brand-name cereal is $4.29, the store might be able to “nudge” more consumers toward its private-label brand if it’s priced at $2.99 instead of $3.09.
And to make shoppers smarter?
Stop ignoring all the other numbers.
“If you’re focused on one product, recognize those right-most digits are important,” Manning said. “$29.99 is not ’20-ish.’ ”
Michael Booth: 303-954-1686 or mbooth@denverpost.com
