What converts better: $100, $99, or $97?
Last Updated September 10th, 2015

I believe the subject line said it all. What converts better? $100, $99, or $97?

And should you even worry about something like this?

Some people would say yes.

After all, look around for split test results and you’ll see results like “changing a button color yields 1 million percent increase in conversions!”

But today I’ve got something a little controversial to share with you. And when you watch this new video, I’m betting you’ll agree with me.

What Price Has The Best Conversions: $100, $99, or $97?

Look around and you’ll notice that there is a trend when it comes to pricing products and services online.

Many people who sell online use prices like 99 dollars or 97 dollars, but never use a round number like 100 dollars.

And when you ask them why, the answer is usually the same:

“Well, I heard that 99 dollars or 97 dollars converts better than 100 dollars because 100 dollars feels like a lot more money.”

I’m Derek Halpern, and you’re watching Social Triggers, the place entrepreneurs and executives learn to get ahead in business and life.

And in this video, I’m going to explain why this idea is flawed. I’ll also show you what to do instead when it comes to “price testing.”

Why Companies Use A 7 or 9 In Pricing

Like I said, most people use a 7 or 9 in their pricing. You’ll see this online. And you’ll see it in retail stores. Even I do it!

And when you ask why, the answer almost always is: “I heard it converts better.”

Or in some rare instances, they’ll say: “Years ago, I saw test results that said the best number to end with for online sales was 7.”

But the bottom line is that no one can furnish any of these so called test results. Not for selling online, anyway.

There may be some random studies out there that suggest this for retail pricing. But that has NOTHING to do with online pricing.

So, the question is:

If a 7 or a 9 really converts better than the whole number, WHY IS THERE NO STATISTICALLY SIGNIFICANT TEST RESULTS ON IT?

There are countless blogs about split testing. And not one of these blogs have ever featured a statistically significant study on the effects of a 7 or a 9 as it relates to online selling.

Why?

Because price testing is inherently hard.

And expensive.

You need hundreds of transactions from variable sources before you can build a truly “statistically significant” test result as it relates to price.

And that’s EXPENSIVE.

Lets run some hypothetical numbers.

You send paid traffic to a landing page and see a conversion rate of a half of a percent.

That means, you need to send 200 clicks to make one sale. If those clicks cost a buck, you’re spending 200 dollars to make one sale.

But you can’t price test one sale versus one sale. You need to generate hundreds of sales.

So, let’s say you want 100 transactions to run a price test with paid traffic. In reality, you want more. But Let’s say 100 to make it easy.

That means, you’re spending 40,000 dollars to conduct one price test. And it won’t even be a good one. As i said, 100 is rarely enough. Especially since it changes based on traffic source.

Now here’s the kicker…

Are you really going to spend that much money just to figure out if you can sell something for 97 or 99 dollars?

HECK NO.

If you’re just starting your business, selling something for 97 or for 99 isn’t going to be the difference between success or failure. Yes, there may be an uptick in sales, but there’s NEVER going to be a big enough uptick to make or break your business.

So, to answer the question: What converts better?

I say: It doesn’t matter!

And that’s probably why you don’t see any online split test results about 97 or 99 or 100 dollars.

Now, let’s talk about what you SHOULD test when it comes to pricing.

When you’re price testing, you’re looking for what’s known as price elasticity.

That means, you’re looking to raise your prices until you see your conversion drop off so significantly that it doesn’t make sense to keep it at the new high price.

As an example…

Let’s say out of 100 clicks, you convert at 10 percent at a 20 dollar price point. That means you make 200 dollars because you’ll get 10 transactions at 20 dollars.

But let’s say out of 100 clicks you convert at 3 percent for 100 dollars. That means, for 3 sales, you’re making 300 dollars.

Now, of course, more money doesn’t always mean its the right decision.

Maybe you’re looking for MORE customers as MORE is part of your business model (meaning you have backend stuff you want to sell).

But if revenue is the model, it would make sense to try raising prices to 100 dollars.

But if you raised it to 200 dollars and you saw a half a percent conversion, then you’ve got a problem. Because you’d make LESS.

And that’s the turning point… when you make LESS from the same traffic. And that’s a BIG problem.

You want to find the price point at which you can make the most revenue with the same traffic.

And doing that, can be the difference between making a successful business and a failed business.

That’s why price elasticity is the most important pricing test to focus on.

That said, there’s ONE psychological effect I want you to know about.

It’s known as the left digit effect.

Long story short:

When people view prices, they look at the left digit, and rarely the right digit.

So, in many cases, 39 dollars seems a lot cheaper than 40 dollars. And 99 dollars seems a lot cheaper than 100 dollars.

But there’s one caveat:

New research came out that suggests this:

When selling products or services based on a feeling or emotions, a round number like 40 dollars may work better than a number like 39 dollars.

But you know what?

I’m just going to sell it for 39 dollars every time. Because I’m not going to waste my time and money testing for a dollar.

I’m going to test for price elasticity, and you should to.

Now, I have a question for you. How do you price your products or services online and why? Do you plan to test for price elasticity after watching this video? Leave a comment and let me know. I’d love to hear your insights.

Now…

And when you’re done watching the video, I want you to do something simple: share your experience with pricing your products and services. What worked? What didn’t work? Or, if you haven’t done anything rigorous, that’s okay too. Just let us know how you came up with your prices.