At What Price Does Charm Pricing Become Irrelevant?

Jun 05, 2015

 

Is there a price at which charm prices stop being relevant or effective and should be replaced with round pricing? It's not the amount, it's the customer.

 

A recent webinar for the Society of American Florists covered the relative merits of charm vs rounded pricing, and included real-world examples of how different retailers applied them in normal vs sale situations.

One of those examples (in a slightly different format) was a screenshot from the Bergdorff Goodman website. It shows Tory Burch sunglasses, sorted so that the least expensive glasses appear at the top.

 

charm-vs-round-pricing.jpg

 

The slide was included to illustrate a situation in which an upscale store (Bergdorff Goodman) and designer (Tory Burch) go with charm pricing rather than the round pricing we would expect and see elsewhere on the Bergdorff site. Below $150 the sunglasses were priced at $149. The next higher price was $165, and round pricing is used from that point onwards.

It seemed like they price for two different sets of customers: the price-sensitive customer that would be attracted to a charm price of less than $150, and less price-sensitive customers that would be more attracted to higher rounded prices.

After the webinar, in the Q&A period, several participants referenced this section and asked about what they had taken to be a dividing line between charm pricing and rounded pricing. Was there a number when charm pricing cease being relevant and effective, and round pricing became the better option?

It's not about the number. It's about the customer. With the example shown the point is not that charm pricing stops working at $150. Instead the brand has decided that the customer looking to spend more than $150 on sunglasses is more likely to be attracted to round pricing. Meanwhile the customer that is looking for cheaper under-$150 sunglasses is more likely to be attracted to charm pricing.

The customer that is attracted to charm pricing will likely be more attracted to charm pricing at any price. This is why you see charm pricing used on everything from candy, gum etc. (under $5) to cars (tens of thousands) to condos and houses (hundreds of thousands, sometimes millions).

Round pricing doesn't replace charm pricing once a particular number is reached. Regardless of the amount charm pricing will imply discounts, savings, and relatively good value, and appeal to the price sensitive cognition based consumer.

Meanwhile round pricing will suggest higher quality, and better appeal to the emotional or status buyer, again regardless of the amount.

Back to the specifics of the flower business. One of the questions was whether expensive (typically over $200) sympathy work should use round pricing while everyday arrangements (usually under $100) should use charm pricing.

Again it's about the customer. A customer who is buying a sympathy piece for a business colleague is likely to approach it as a business decision, and be more attracted to something at $299 or $349 than $300 or $350. Meanwhile someone who was close to the deceased, is making an emotional decision, or is concerned with quality more than price, is likely to be drawn to round pricing on a line of premium sympathy work.

The same thing applies at the other end of the spectrum. A price-sensitive customer buying Mothers Day flowers is more likely to be drawn to a charm price like $59. An emotional buyer, more focussed on quality than price, would be more interested in a "signature" piece at $60 or $65.

It's not a question of at what price round becomes more effective. The different practices appeal to different buyers and can be offered side by side – a line that uses charm pricing and a premium "signature" line that reinforces quality through the use of round pricing. This lets a retail florist appeal to the greatest number of buyers and give all of them the chance to spend more money.



Category: Charm Pricing

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