Ever wonder why no one sells
products or services for a round figure?
The best example might be gasoline prices. A gallon may
sell for $1.49; it will not retail for $1.50. Why not? Would 1/10 of
a cent put someone off? In financial terms alone, it would not. But,
round figures represent barriers to how much consumers are willing
to spend, and by pricing an item below the round number, it seems
significantly less expensive than the math would indicate. A buyer
with a $500 budget can rationalize a $499 purchase. In addition,
people focus on the first number in a price; what follows is
factored into the decision as well, but if the initial figure puts
off a potential customer, that's a lost sale.
specific pricing for commodities, there are two schools of thought.
One relies on bargain-basement costs, undercutting the competition
in hopes that volume sales will make up for the limited profit
margin. The second strategy relies on the principle of "you get
what you pay for", and the item is deliberately priced high in
the hope that the cost will indicate high quality. Obviously, your
price should cover the cost of marketing, and overhead, leaving you
with some profit. Price can make a difference since there are so
many competitors in the arena.
far better off with a small profit from a growing base of customers
than with a large margin from a few customers who might be tempted
to go elsewhere because of price.