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Why $499.99 - The psychology behind a purchase

Discussion in 'Making Money' started by ShapeRoot, Jun 8, 2013.

  1. ShapeRoot

    ShapeRoot Newbie

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    In my introduction thread I mentioned that I am interested in the neuromarketing field and have followed courses on neuromarketing, I have a lot of knowledge on the matter and I am well-willing to share some of the basics with you to open your minds. Today we discuss the psychology behind the listing of $499.99 instead of $500.

    Why $499.99?


    Nearly all modern stores price their products at $499.99 instead of $500. The usual thought behind doing this is that people thing it as fourhundred-ninety-nine instead five hundred, the usual perception is that they think more of $400 than of $500. However studies have suggest that the reason is different.

    A study tested how people reacted to different starting prices. They had three sample prices namely:

    • $1,985
    • $2,000
    • $2,015
    When making a payment they differ only 1 cent each, so the real difference is virtually non-existent. When the researched group of people was asked to determine the bulk price of the product, the group that was present $2,000 named a significantly lower number than the other group.

    The explanation for this is that we tend to anchor prices (I will create a separate post about anchoring as it is vital in marketing) on the initial price. If, lets say you see a t-shirt in a store priced $40 you might guess that its wholesale price was $36 or $37, not very specific. If the item is priced $39.95 prices like $39.65 or $39.15 come to mind, as they seem similar to the anchored price.

    This psychology can also be seen when someone puts up a product (for example a second hand veihcle) for $19950 instead of $20000 ,a price closer to their initial set price would appear when they listed at $19950. If you were to list the item at $19950 the bid might start with $19750 or something along those lines. However if you would say $20000, or even worse 20 K, the bid would tend to say $19000.

    This was just a warm up, and many of you may already be familiar with the concept, but I liked to share it anyways. Ill upload some more of these frequently if you all like it, thanks for reading anyways!
     
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    Last edited: Jun 8, 2013
  2. RankSnatcher

    RankSnatcher Regular Member

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    Mr. Philip Kotler Introduced this $499.99 psychology
     
  3. ShapeRoot

    ShapeRoot Newbie

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    Yep, I am very well aware but I don't think it adds a lot to the information in the OP, thanks for adding though!
     
  4. RankSnatcher

    RankSnatcher Regular Member

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    Read this Philip Kotler's book to know more about psychology behind a purchase
     
  5. ShapeRoot

    ShapeRoot Newbie

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    I've read all of his books, however I think a short guide with an example like this one is more digestable than a book consisting of 744 pages. If you are interested in marketing I do greatly encourage people to read his books.
     
  6. carlikito

    carlikito Regular Member

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    Maybe you can tell us why warriors bso's price end in 7's ?
     
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  7. ShapeRoot

    ShapeRoot Newbie

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    $499 used to be relatively new, however some 'think' it is no longer effective as people will see it as $500 because it has been used so much. Therefore $495 and $497 are increasingly more popular as they relatively seem a lot further from $500 than $499 is, therefore they think it enhances their sales make their products priced at $97 instead of $99 look less like $100.
     
  8. ButcherPete

    ButcherPete Regular Member

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    If anyone is interested in the psychology of marketing, they might find some use in the book The Social Animal by Ellion Aronson. It was written in '73 or something, but the material is timeless. It's mostly about psychology in general, but there are very useful bits of information in there.

    It goes into detail about things like how people percieve authority, how to gain trust, how to convince people of a certain viewpoint, and just how people think in general.
     
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  9. EvilEmperor

    EvilEmperor Jr. VIP Jr. VIP Premium Member

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    Subscribed. Can you recommend books to read?
     
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  10. TheMasterOfMoney

    TheMasterOfMoney Jr. VIP Jr. VIP Premium Member

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    I recommend blink, amazing book for psychology in general and has lots of business information behind sales
     
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  11. Sgt Kraut

    Sgt Kraut Regular Member

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    [h=3]Influence: The Psychology of Persuasion[/h]
     
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  12. ShapeRoot

    ShapeRoot Newbie

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    Blink and Influence: The psychology of persuasion are great reads.

    I'd recommend Predictably Irrational by Dan Ariely as well, Good luck!
     
  13. imperial444

    imperial444 Elite Member

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    499.99 is like in the middle, not a cheap, but not so huge priced product to work with. So can be worked out with the right customer.