Charm and Prestige Pricing

Have you ever been in a shop where they have all their charm and prestige Pricing prices ending in £xx.95? Do you even do it in your business? Some people think it projects a feeling of higher quality for the whole shop. But is this really the case? Well, there must be something to it, after all, everything in Gap is priced at .95… On the other hand, lots of other shops put their prices at .99. That means they’re getting an extra 4p for every single item they sell, and we all know the saying, “look after the pennies and the pounds will take care of themselves”. Then you have somewhere like Harrods where they’ve just done away with the pence altogether and sell everything at whole pounds prices. So what’s going on? They can’t all be right, because they’re doing different things… Well it turns out there are a couple of different psychological strategies being employed here. Firstly, for the .95 vs .99 debate, it turns out (from research carried out in 2005) that taking a penny off is mostly only useful if you’re reducing the left-hand digit in the price (e.g. £30.00 to £29.99), and it’s called ‘Charm Pricing’. Changing £34 to £33.99 is of more limited use in encouraging customers to think of the design as cheaper. The best and most useful examples of charm pricing are when you manage to reduce the number of digits on the left of the decimal point (i.e. from £100 to £99.99 or £10 to £9.99). The other psychological trick is the one Harrods is employing of doing away with the pence altogether. This is known as ‘Prestige Pricing’, and this is when the shop is subconsciously sending you a message that they are more upmarket. The theory is, if you are worried about the pence, maybe this isn’t the shop for you. Also, in fact, when using whole pounds pricing, don’t write the price as £50.00, but put £50 instead. This is another psychological trick to making the price appear lower, thereby mixing both the exclusivity and value aspects into the same price. Either way, there doesn’t seem to be much strength behind .95 pricing. It doesn’t fit with either charm or prestige pricing, so you really are just losing 4p for every item you sell. Time to get the price labels out…