Price points are one of the most challenging things in business to come up
with. At what point does something become too expensive for your target
audience? It is something we wrestle with constantly. Raising the price
decreases the number of buyers but not at a steady rate. The challenge is always
figuring out the highest price you can sell for while maintaining the relatively
biggest user base.
Sometimes pricing things too low can hurt you. People assume that a product
or service is of low quality if it isn't within a certain price range. So
coming up with a good price is always a real challenge.
Over the years we've found these price points to be relatively strong:
$6.95, $8.95, $9.95, $14.95, $19.95, $24.95, $29.95, $34.95, $39.95, $44.95,
$49.95, $69.95, $89.95, $99.95, $129, $149, $179, $249, $299, $499.
But not all of these price points are equally good. And their strength
changes from product to product.
For example, Object Desktop, our company's primary product, is priced at
$49.95. We would prefer to have it at $69.95 but we believe that the user
base would collapse. $49.95 is something people will buy without too much
worry. At $69.95 it enters a different realm. The only reason we've been
able to stay at $49.95 is because our user base has been so helpful in helping
out on our forums with other users who have questions. Otherwise we'd either
have to drop features or raise the price.
A more pressing one is our upcoming expansion pack for Galactic
Civilizations. We originally envisioned it being $19.95. That is a great
impulse buy price point. The problem is that it's not likely to be widely
distributed which changes the target demographic considerably. So we've
been playing around with raising the price to $24.95 or even $29.95. But
that price may actually decrease sales to the point where we actually generate
less revenue as a result. So we're still agonizing on that.
The reason you always see .95 or .99 by things is because people, particular
males, don't pay as much attention to the cents portion. Moreover, males are
more likely to round down for some reason than females. Which is why you'll hear
some guy say "Yea, it was like 20 bucks" with the wife correcting "It's $30"
when the actual amount was $24.95 or $29.95. But it's hard to say if
that's still the case, that was from research back in the 50s and 60s and
shoppers are much more savvy.
We usually just go by our own gut reactions. Anything under $10 is basically
"free". At that point it's more a matter of dealing with the obnoxiousness of
on-line stores as well as factoring in whether what I'm buying is is "worth" the
amount they're asking. I'd feel stupid paying $9.95 for Q-tips. Same on
skins. For some reason $9.95 on an icon package or suite seems just a tad too
high. Yet $8.95 is fine even though it's only $1 less. So a lot of time you have
to play it by ear.
I decided to write this article because I just couldn't find any good
information or studies on the net about price points. The 19.95 to 24.95
difference is a big one for instance that many struggle with.
Feel free to share your thoughts and experiences.