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Round Numbers

 

DisciplinesMarketing > Pricing > Round Numbers

Description | Example | Discussion | See also

 

Description

We find round numbers easier to mentally process and accept than more complex numbers. For example 20 is just a bit easier on the mind than 19 and more so than 19.99.

When prices are the same as a coin or note, this makes it easier for customers to hand over the exact price, without the hassle of dealing with change.

Example

A store uses 'everyday pricing' as a brand, rounding prices to whole numbers, mostly using multiples of five and ten.

A company uses round numbers for its price range, with clear multiples between separate products and ranges.

A store has a range of $1, $5 and $10 products that match note values, making purchase very ease.

Discussion

The basic principle of round numbers is one of ease. It is easier to think about a simple number than one that is more complex, and hence easier to say yes to it. When matched with a coin or note, and where customers are more likely to have this money, it further eases the purchase.

Rounding numbers contradicts the very popular 99 Effect, where pricing such as 19.99 may be seen as being significantly less than 20.00. It may also be argued that the cognitive effort of 19.99 could make people not try to quantify it, which can make them accept it more easily (or perhaps reject it).

Another consideration is around the Unique Number Pricing effect, where people may assume that an unusual price is more honest, being based on actual costs with a simple addition for profit. Against this, most people are fully aware of the deceptive nature of the 99 Effect and other variations, and may see round numbers as more honest.

When considering which approach to use, consider factors such as:

  • The significance of affordability price bands.
  • The cognitive effort involved in understanding the price, and how the target customer will handle this.
  • How cynical your audience is and how round numbers might lead them to appreciate you as being more (or perhaps less) honest.
  • The price banding effect for example where customers allocate your price into 'cheap', 'moderate' and 'expensive'.
  • Whether your customers pay in cash or with a credit card.

See also

99 Effect, Unique Number Pricing, Easy Principle

 

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