Precise Pricing Equals Higher Profits

Manoj Thomas, Daniel Simon, and Vrinda Kadiyall, researchers at Cornell University, have found that consumers determined incorrectly that homes for sale at precise prices (such as $325,425) were lower in price than homes that were for sale at rounded-off prices (such as $325,000).

In other words, customers concluded that they're getting a better deal if they buy a home priced at a precise number than a home priced at a rounded off number. Their research suggests that buyers perceive precise list prices to be lower, and therefore would make buying offers that are closer to the listing price rather than offering the seller a price that is much lower than the listing price.

Many retailers have taken the "precise pricing" approach, too. Instead of selling a widget for $49.99, these retailers are selling this product for $51.23 or $48.87. Wal-Mart and other retailers have had success pricing products in this manner.

Read the abstract of the precise pricing research.

Read an article about the Cornell study.

Please comment if you have thoughts about this research.

Skip Anderson is the Founder and President of Selling to Consumers, a B2C sales training and consulting firm. Subscribe to the free Selling to Consumers Sales Tips Newsletter.