Sunday, December 22, 2013

Jump the Cut Point Hurdle

What about fourth place? In Olympic competitions and horse races, we usually learn who came in first, second, and third, but beyond that, it’s a group of also-rans. The psychological distance between third and fourth is leagues larger than the psychological distance between second and third.
     In other types of ranking lists, there are also cut points. Actually, researchers at Seattle University and Rutgers University-Camden find that there are usually multiple cut points. On a “Top 50 Retailers” list, consumers are likely to see a bigger difference between ranks 10 and 11 than between ranks 9 and 10 and a bigger difference between ranks 25 and 26 than between ranks 24 and 25. The research indicates it would be worthwhile for a retailer to spend resources to jump a cut-point hurdle, but less likely to be cost-effective to move up without jumping a hurdle.
     However, moving from position 11 to 10 is likely to be noticeably tougher than moving from position 12 to 11 according to something called Zipf’s Law. The higher you get on the list, the more effort it takes to move up one notch further.
     There are cut points in retail pricing as well. The major example is the use of prices that end in a 99. $3.99 looks noticeably better to a shopper than does $4.00. $499.00 is better than $500.00 and will not be less attractive than $495.00.
     Still, there are exceptions. When quoting better-best alternatives to customers, say whole dollar amounts. If the items are priced at $29.99 and $39.99, say, “This one costs less than $30, and this one costs less than $40. Here are the extra benefits for the additional $10.”
     Also use whole dollar pricing for gift items, luxury items, and fun items.
     Yet, if you’re marketing a cut-rate store image, use odd-cents pricing, such as $8.37, to convey that you’ve pruned every last penny from the cost.
     In print, make a discount look more attractive by filling it with 1’s and 2’s. A discount from $222.99 to $211.99 looks more attractive than a discount from $199.99 to $188.99, although the second discount is actually a larger percentage of the regular price.
     However, if you are saying the price, “Seven dollars, sixty-six cents,” sounds like a better deal than, “Seven dollars, twenty-two cents.” The “s” sound in “sixty-six” implies “small” and “smooth,” while the “t” sound in “twenty-two” implies “tension.”

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Respect Zipf’s Law 
Handle Customer Satisfaction As Relative 
Roll Those Price Quote Wheels-Within-Wheels

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