Using charm pricing to increase your book sales

Many self-published authors, focused as they are on the U.S. market, tend to take the lazy road and simply input a USD price and allow the likes of CreateSpace, Amazon, and Kobo to auto-convert to other currencies. The problem with this approach is that, between currency fluctuations and differences in sales tax in various countries, one’s book price can be all over the map. More importantly, however, by taking this approach you are likely cheating yourself out of a potentially lucrative sales strategy: charm pricing.

Charm pricing, also known by various other terms such as pretty pricing and magical pricing, refers to pricing that is believed to have a positive psychological effect on consumers and encourages higher sales volume.

Charm pricing has been around for about a hundred years, and in some ways has become a chicken-and-egg concept, with the ubiquity of its use skewing any attempts to verify its authenticity. Nevertheless, studies that have tried to measure the effects of charm pricing do point to some veracity to our widely held beliefs about it.

Essentially, the thinking goes like this:

  • Prices that end in .99 are associated with low prices, sales and bargains.
  • Prices that end in .95 are associated with good value.
  • Prices that end in .00 or which do not contain any decimal digits (e.g., $120) are associated with quality and luxury.
  • Prices ending in .78, .88, and .98 may also be associated with low prices (the data was inconclusive).
  • Prices ending in .49, .50, and .90 may be perceived negatively (also inconclusive).
  • Prices that when spelled out have fewer syllables are perceived as lower, so $12.00 is perceived as less than $11.00 even though it is clearly not; note this only works when the price is viewed in isolation, not in comparison.

With regard to the third point, you will see this belief in effect in restaurants that want to be perceived as offering quality over price — the menu will say “$12” instead of “$11.99” — and in jewellery stores and other shops selling luxury items. Some even go so far as to eliminate the dollar sign as well.

In our industry, if you look at print book list prices you will see the concept of charm pricing at work. Most hardcovers and new releases have list prices ending in .95 (good value) or .00 (luxury, quality); it is the same with trade paperbacks when first released. Older trade paperbacks and mass-market paperbacks have list prices ending in .99 (low-cost, sale, bargain).

Amazon, who are committed to presenting ebooks as the low-cost reading option, encourage the use of the .99 format: in the U.S., Canada, Mexico, India, and Brazil where tax is either not included in the displayed price or is not applicable, each pricing band tops out at a figure ending in .99. In Europe, where the display price must include VAT, the cap for euros is €9,70; when 3% VAT is added, this amounts to €9,99. The anomaly is the UK, where for the life of me I do not understand the price cap of £7.81: when 3% tax is added, the price is £8.04, not £7.99. (Note: KDP’s EU pricing caps will change on January 1, 2015 with changes to VAT in the EU.)

Charm pricing is cultural as well.

In China, the number 8 is considered universally lucky, while the number 4, which sounds like death when vocalized, is considered bad luck. In Western cultures we generally avoid the number 13. In Japan the number 4 is bad luck for the same reason as in China, and the number 9 when vocalized sounds similar to the Japanese word for torture or suffering—thus, Amazon have set a price cap of ¥1250 for that market, not ¥1249 or ¥1299 in keeping with the format of the other KDP price bands. In Japan, the numbers 4 and 9 are considered so unlucky that buildings often do not contain floors or rooms in these numbers, and the number 43 is particularly avoided in maternity wards because phonetically it means stillbirth.

If you check sites such as Google Play, who set the sale price themselves for indie content, with very few exceptions you will see the use of the .99 format. Apple contractually obligate publishers to set prices ending in .49 or .99  except for Japan, where the price must be rounded up or down to the nearest round yen number.

Charm pricing is considered so important in retail that whole consulting industries have arisen to address it, and studies have concluded that the use of charm pricing can literally improve sales by, on average, 24%. Authors should take this into consideration, and set a specific price for each jurisdiction made available to you by each of the retailers. Taking the lazy road of auto-conversion may be robbing you of sales.

 

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8 thoughts on “Using charm pricing to increase your book sales

  1. If Amazon only recognizes the .99 cent unit, is it possible to post a book at, say, $3.95? Also, how does Amazon’s automatic price matching affect prices you set in different countries. If I account for Canadian currency on Kobo, for example, even US$3.95 properly converted to Canadian currency may be read as higher or lower than the US price. Will Amazon then change it to match or does it account for conversion?

    1. Hi BP,

      Amazon does not only recognize the .99 cent unit; $9.99 is merely Amazon’s preferred top price for an ebook. You can set whatever price you want.

      On Kobo, you can set your own USD price instead of using auto-conversion; in fact, you can set your own price for all the currencies they offer. This is what I do, to keep better control of price parity and to try to effect charm pricing.

      Amazon’s price matching is complicated. In theory, Amazon allow you to set different prices on the various European sites, to take into account, for example, the need for lower prices in Spain as opposed to Germany. Since Amazon are not a competitor of themselves, you can do this. But if you set a lower price on Amazon.es, Kobo could lower their Euro price to match, which could trigger a price match on all the other Amazon European sites. It’s a dog’s breakfast.

      My own experience of watching Amazon’s price matching policies is this: a few pennies difference (because of currency fluctuations, e.g.) and Amazon cannot be bothered. If your ebook does not sell well enough to send out the web bots, no price match will occur. It’s only when a title starts selling well, or someone complains about/reports on a price discrepancy, that Amazon price matches.

      1. Thanks for the great information, Michelle. So does that mean you can only price on Amazon in units of .99? Could you post a book for $3.95, or would Amazon convert it to $3.99?

        1. Hi BP,
          No, you can price your book at any value. Amazon will not change your price from $3.95 to $3.99.

          When I say Amazon are committed to the .99 cent “low cost, bargain” format, what I mean is that they have set their pricing bands in such a way so that either the .99 option is the minimum or maximum price. So, for example, 70% is paid on ebooks priced between $2.99 and $9.99. This has the effect of encouraging publishers to use the .99 end value, which connotes bargain, which is how Amazon, who built their brand on the discount model, want consumers to perceive ebooks as. And the pricing band encourages the ceiling price of $9.99 on ebooks, for which Amazon have a long and contentious history. However, only Apple enforce the use of .99 (or .49) contractually. Amazon do not.

          (P.S. I have made a few changes to the blog post to make this clearer. Thanks for the feedback.)

  2. I’m intrigued by this, as it seems I’ve been pricing my books in the quality range while also broadcasting that it’s actually an ‘expensive discount’.

    If I set my price on Amazon at an even number (to denote quality), say $5, then can I set offer it to Apple at $4.99, or does my contractual obligation to Amazon require that I mark it all the way up to $5.99?

    1. Your Apple contract dictates your price must end in .99 (or .49 in certain circumstances). If you set your Amazon price at $5.00, Apple will not care. Contractually, Amazon can only lower your price to $4.99 to match. I don’t know why you would think you have to set it to $5.99.

  3. Hi Michelle,
    Very interesting, I just found your site and already found lots of valuable information like this, thanks for sharing.

    I have read somwhere how the cover color
    affets sales, what’s your experience on that?

    1. Of course the cover affects sales, and a good cover can increase sales. What does NOT increase sales is fake likes on social media accounts, like the fake followers the website you are linking to promises.

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