by Sean McAlister

Why are most products that I see priced with the number 7 in them?
(especially in INternet Marketing)


I know that there are psychologies with various pricing methods but where and when did the number 7 replace the number 9 for instance.

I also know that there are a number of urban legends have grown up around the number 7±2. Could this be why?

In general, memory span for verbal contents (digits, letters, words, etc.) strongly depends on the time it takes to speak the contents aloud, and on the lexical status of the contents (i.e., whether the contents are words known to the person or not. Seven is the smallest positive integer requiring more than one syllable in English.

Now I realize that this report is a bit dated it still spurs further

According to a 1997 study published in the Marketing Bulletin, approximately 60% of prices in advertising material ended in the digit 9, 30% ended in the digit 5, 7% ended in the digit 0 and the remaining seven digits combined accounted for only slightly over 3% of prices evaluated.

Which mix was the number 7 in?

In a traditional cash transaction, fractional pricing imposes intangible costs on the vendor (printing fractional prices), the cashier (producing awkward change) and the customer (stowing the change). These factors have become less relevant with the increased use of checks, credit and debit cards and other forms of currency-free exchange.

Now that many customers are used to odd pricing, high-end retailers such as Nordstrom psychologically-price in even numbers in an attempt to reinforce their brand image of quality and sophistication.

So are most of the products at the xx7 price tag perceived as a lesser value?

Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing showed that when the price of margarine was lowered from 89 cents to 71 cents, sales volume increased a mere 65%, but when it was lowered from 89 to 69 cents, sales volume increased by 222%. In another study, the perceived value of all the numbers between 1 and 100 were studied, and 77 was shown to have the lowest perceived value relative to its actual value

Schindler & Kibarian (1996) tested odd pricing using three versions of a direct mail catalog for women's clothing. The catalogs were identical except for the prices, which ended with 00, 99, or 88. The version with prices ending in 99 generated 8% more sales volume and had more purchasers than the 00-ending version. The 88-ending catalog produced a similar sales volume and number of purchasers to the 00-ending version.

Pricing involves asking questions like:

How much to charge for a product or service? This question is a typical starting point for discussions about pricing, however, a better question for a vendor to ask is

- How much do customers value the products, services, and other intangibles that the vendor provides.

What are the pricing objectives?

Do we use profit maximization pricing?

How to set the price?:
(cost-plus pricing, demand based or value-based pricing, rate of return pricing, or competitor indexing)

Should there be a single price or multiple pricing?

Should prices change in various geographical areas, referred to as zone pricing?

Should there be quantity discounts?

What prices are competitors charging?

Do you use a price skimming strategy or a penetration pricing strategy?

What image do you want the price to convey?

Do you use psychological pricing?

How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues?

Can real-time pricing be used?

Is price discrimination or yield management appropriate?

Are there legal restrictions on retail price maintenance, price collusion, or price discrimination?

Do price points already exist for the product category?

How flexible can we be in pricing? :

The more competitive the industry, the less flexibility we have. The price floor is determined by production factors like costs (often only variable costs are taken into account), economies of scale, marginal cost, and degree of operating leverage.

The price ceiling is determined by demand factors like price elasticity and price points.

Are there transfer pricing considerations?

What is the chance of getting involved in a price war?

How visible should the price be?
- Should the price be neutral? (ie.: not an important differentiating factor), should it be highly visible? (to help promote a low priced economy product, or to reinforce the prestige image of a quality product), or should it be hidden? (so as to allow marketers to generate interest in the product unhindered by price considerations).

Are there joint product pricing considerations?
What are the non-price costs of purchasing the product? (eg.: travel time to the store, wait time in the store, dissagreeable elements associated with the product purchase - dentist -> pain, fishmarket -> smells)

What sort of payments should be accepted? (cash, check, credit card, barter) Pricing Process of determining what a company will receive in exchange for its products.

A well chosen price should do three things :

1. Achieve the financial goals of the firm (eg.: profitability)

2. Fit the realities of the marketplace (will customers buy at that price?)

3. Support a product's positioning and be consistent with the other
variables in the marketing mix.

-Price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns.
-A low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors

-From the marketers point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay.

-In economic terms, it is a price that shifts most of the consumer surplus to the producer.

I am unsure as to what the difference between 37 and 36 dollars for a product is but if you are offering a good quality product wouldn't $39.00 be a better price?

Sean McAlister