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What is Charm Pricing ?

Ashish Kumar

10 min read
What is Charm Pricing ?

What is Charm Pricing with examples. Also known as the 99 pricing strategy. The psychological pricing technique that helps improve sales and is used by companies such as Apple & Uniqlo.

Research has shown a consumers' perceptions and evaluations are disproportionately influenced by the left-most digit of the product price.The left-digit effect and the magnitude of price has proven to have positive impact on purchase decisions for a very long time.

Apple uses charm pricing
Apple uses charm pricing

Studies have shown that consumers perceive just-below prices as being lower than they actually are. For the iPhone above, Apple prices it as $999 and most shoppers psychologically round the price down to $900 rather than rounding up to $1000. Perceiving the iPhone to be almost 100 dollars cheaper !

These just-below prices (like .99, .95,.97) are believed to drive greater demand and work almost like a charm on buyers. Hence, the name Charm Pricing.

At Konigle we get asked a lot, does Charm Pricing work ? Over 76% of stores that use Konigle, use the Charm Pricing technique. We analyzed over 1.5 million online stores and found stores using some form of charm pricing technique end up making 4% higher revenue than those without. Yes, there could be multiple reasons for these stores doing better, but we find improved conversions and better brand recall as two major outcomes of using charm pricing techniques.

Huckberry.com using the 0.98 rounding technique for a promotion 
Huckberry.com using the 0.98 rounding technique for a promotion 

Key takeaways of the study

  1. Stores using charm pricing have higher revenue.
  2. Stores using charm pricing show improved conversions.
  3. Stores using charm pricing have better brand recall, think 99 cent Apple iTunes.
  4. Stores find it cumbersome to implement, especially for products on discount.
  5. Stores can implement charm pricing on their store using Konigle in under 3 minutes.

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