Does it make sense to use cents in pricing?

A full page ad by Miele grabbed my attention last week. The ad said I could save $10,066 on a range of their appliances, but I’m not in the market for a new kitchen so that’s not why the ad got my attention.

The ad got my attention because of its unusual use of decimals. Let me explain.

If the number sounds longer, it seems bigger

Researchers keen to understand how consumers perceive price points on the basis of how they are presented ran a series of experiments varying whether a price had a comma and/or decimals. They found that the inclusion of commas (e.g., $1,599 vs $1599) or cents (e.g., $1599.85 vs $1599) led people to perceive the number to be bigger. Why? It seems we spell the number out in our heads and equate more syllables with numerical magnitude.

Take care when crafting your price point

This research has a couple of clear implications for business:

1. If you want to represent a saving, stretch the number out
2. If you are representing your cost, ditch the decimals

Here’s the Miele ad.

You can see the saving of $10,066.44 makes sense according to the research.

But then they go on to list the normal price ($83,887) and the redeemed price ($73,820.56), and the marked down value seems longer and therefore bigger than the RRP.

They could have resolved this by:

• Listing the normal price as $83,887.00 so it was stretched out with cents, or
• Ditching the weird decimals throughout and had a rounded number discount ($10,066), normal price ($83,887) and marked down price ($73,820).

I would have opted for ditching the decimals because carrying an unusual number  (e.g. 44 cents) provokes people to think about how they calculated the number rather than whether the number is good. In behavioural terms it’s the difference between engaging System 2 thinking (rational, critical, analytical) and System 1 (intuitive, emotional, habitual).  

Who knows what discussions they had around the kitchen table at Miele, and whether the psychology of numbers was even considered. My hope is that you will pause whenever you have to promote a price point and look first at whether and what research is available. Why guess when you can know?

More on how to persuade buyers through numbers psychology here.

Bri Williams runs People Patterns, a consultancy specialising in the application of behavioural economics to everyday business issues.