Localized Pricing That Hits the Sweet Spot

The practice of psychological pricing is a familiar one to most shoppers. Department stores favor the .99 ending while brands like J.Crew prefer whole dollar amounts to discourage shoppers from associating their new Spring Collection with deals.

A new study published in the Journal of Consumer Research says pricing items with rounded numbers has another purpose: encouraging shoppers to use their emotions to make "feel-good" purchases.

Take champagne, for example, which is associated with celebratory thoughts. Researchers at the University of Singapore found that participants were more likely to purchase a $40 bottle of champagne over a bottle marked $38.25 because rounded prices are more fluently processed and foster reliance on feelings.

On the other hand, participants were more inclined to buy a calculator-a utility item-if the price wasn't rounded because non-rounded prices aren't processed the same way and instead rely on cognition.

International retailers take note: you can manipulate prices across different markets in a way that influences conversions and keeps shoppers happy.

Keep prices consistent

When Brooks Brothers launched their first non-US stores in London, they ensured British shoppers saw the same prices online as they would in person, which led to a successful launch.

That's because in an omnichannel environment, consistency is key. Customers want to see the same prices whether they're buying online, in-store, or from a mail-order catalog.

And shoppers who see inconsistent pricing are more likely to compare and bargain hunt from channel to channel rather than completing a purchase immediately.

Localize your pricing strategies

When you sell internationally, prices converted from one currency to another, such as from dollars to euros, can look and feel awkward, leading customers to believe their market is an afterthought instead of part of a globally minded push to reach them.

Your pricing strategy should take this into account and should be localized according to the market. In Japan, for example, consider displaying prices on comparable products to the nearest JPY 1,000, a common currency denomination that Japanese consumers have come to expect. In the UK, however, you may want to round all prices to a predetermined odd number, such as .95, to show GBP 39.95 instead of GBP 40.00.

Sephora uses this approach in Canada, rounding their prices to even amounts so they don't feel like foreign exchange prices.

Use country-specific prices

Shoppers have different expectations about what's included in the product price, but for the most part, prices that are only the starting point for additional fees make shoppers feel nickel-and-dimed.

With country-specific pricing, you indicate up front whether duties and taxes are included in the product prices for a particular country. For example, you can make your online prices duty-inclusive in Canada, and duty- and VAT-inclusive in the UK to eliminate unwelcome add-ons.

The right price matters, but so does the experience. Create consistent, localized prices across all channels, and include transparent prices inclusive of duties and taxes in markets where customers it. These tactics, among others, will keep keeps shoppers happy through checkout and drive conversions. And then you can toast to your success with some fancy champagne.

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