How to price it right

In our brains, numbers are more than plain facts. As the following two ideas demonstrate, psychology and physiology play roles in how we perceive numbers and a consumer’s decision to purchase.

End in seven

The number seven has a special place in our minds, often making it a more attractive number than other numbers. Scientifically, there’s a reason for this.

Neurons in the brain are clustered in groups of seven, and consequently, we can hold groups of seven digits in our mind more easily. This means numbers ending in seven are more acceptable to us than other numbers. This is why some companies end their prices in the number seven. Why not think about ending your prices in a seven or 70? A price of $207 can feel more acceptable to clients than $199, meaning clients may be more likely to buy.

Frame your price for success

Before you name your price that ends in seven, remember the wisdom of Nobel prize-winner and Princeton professor Daniel Kahneman, who researched how people make decisions. He found decisions weren’t made in isolation, but instead were affected by what happened just before they were made — even if the preceding event had nothing to do with the decision itself.

When pricing comes into play, this is more important than ever. This means when you tell a price to a client, they measure it based upon the numbers they heard prior to it. Therefore if your fee is $1,000, and your client was previously thinking about something more expensive than that — for example, the price of a car — the $1,000 fee may not seem as expensive to them.

From the 2013 Annual Meeting presentation “60 sales ideas that work,” from Top of the Table qualifiers David Batchelor, Dip PFS, CFP; and Simon John Gibson, Dip PFS.