The year is circa 1994 and I’m scraping together my pocket money into a coin purse, jamming my helmet on and jumping on my bike to ride to the local milk bar. I’ve got my sights set on a mixed lolly bag that will be sitting at the counter, ready for me. I’m crossing my fingers for more than one of those banana lollies I love the most and hoping I don’t get any dreaded liquorice.
There they are on the counter, ready for me. One mixed lolly bag for 99 cents – yes please!
Not a dollar, it’s 99 cents. That’s less than a dollar! What a bargain!
Problem is, I’m not even getting change from this because 1 cent coins were withdrawn from circulation in Australia 3 years earlier.
But I’m still getting a bargain, right?
Poor 10-and-a-bit year old me. Feeling both like a savvy bargain hunter and just a teensy bit ripped off at the same time.
Even if I had gotten that one cent change, I wouldn’t have done anything with it. I would have had to wait an annoyingly long time until I’d collected at least 5 or 10 of them to do anything of value with them. But that’s not the point. It would have been in my pocket and I would’ve had the choice of what to do with my change.
Why wouldn’t they just price them at $1 when that’s what I have to hand over for the lollies anyway??
Blindly following the doctrine
Fast forward 20-something years. Like most online business owners, when I first started out selling products and services online, my pricing structure followed the doctrine. No, it’s not $50, it’s $47. Not $200, $199.
There’s a name for this type of pricing: it’s called “charm pricing” or “psychological pricing” and it’s been employed for decades, even in suburban milk bars back in the mid 90s.
It’s a pricing tactic that involves knocking the last digit down, below the whole number, typically to an odd number (such as 9, 7 or less commonly these days, 5). It’s employed because it has a proven psychological effect on consumers and can increase demand. We believe the price we’re getting is cheaper, because our brain associates the price with the lower number.
For instance, if I’m seeing $9.99 when I’m making quick pricing decisions, my brain tells me it’s closer to $9 than it is to $10. Even though that’s clearly not the case. This occurs most often when there’s little other information given to the consumer. It’s not a conscious decision, rather a short cut.
“Recent studies have demonstrated that buyers do not always process pricing stimuli in a conscious, deliberate manner, but instead frequently rely on the non-conscious, automatic processing of price information (Coulter, 2003; Xia, 2003)”
via Coulter and Coulter (2005) in the Journal of Consumer Psychology.
So, by not fully processing all the available information (or, by not being provided with all of the information) we think we’re getting a better deal.
Of course, we’re not always in a rush or lacking information. In those instances, we see the charm pricing and our brain does calculate to the nearest whole. But maybe that leaves us feeling a bit like the kid with the 99 cent lolly bag they had to pay $1 for. Why isn’t it just a dollar???
Is manipulation really something we want to do?
As brand owners who continue to employ charm pricing, and typically combining it with other psychological tactics like scarcity or urgency (both built on fear), we’re indirectly saying we’re ok with manipulating our audience.
True consumer-centricity has to consider the impact that tactics like these have on society at large. And while all who use charm pricing aren’t evil per se, its original intent to manipulate consumers isn’t exactly the noblest.
The real struggle of course is that these tactics work. And sadly, it’s often so easy for us to gloss over the ethics of our decisions if the giant carrot of increased sales is dangling right in front of us. But we’re better than that, right?
I believe brand owners today have a responsibility to do better by consumers, because they – we all – deserve better. Let’s put our money where our mouth is, so to speak. If we’re truly ‘purpose driven’, ‘human centred’ and ‘consumer first’, and ‘ethical’ brands – then let’s bloody well act like it, mmkay?
Integrity over trickery.
Transparency over puffery.
Purpose over profit.
I am in no way saying I’m perfect. I know I’m likely unknowingly carrying on with some deep-seated marketing trickery, indoctrinated from almost 20 years in the field. But the point is, I’m trying to unravel these assumptions one by one. And I’ve taken action by pledging my commitment to ending manipulation in marketing to The Ethical Move. If we all start to question our assumptions and discover their true roots, surely these are small steps to making a better world.