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I Forge Iron

The secret of pricing things


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I'm not quite asking what to charge here so much as if the cutting of say around 5 cents on a price tag makes the real difference. Say $19.95 vs. The good old rounded $20.00. I try to keep my numbers simple and rounded. I'm not really the bean counter, just try to keep it real. But, does that stuff really work? People seeing just under the rounded amount? Do they really see more of a deal saving 5 cents or a penny at $19.99, instead of a rounded $20., $40, whatever? I just try to keep stuff simple either in the loss or gain factor. I hate the in between but is it to an advantage to price in cents?

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Das,

Eight or nine years ago I read an article in retail commerce and psychology journal (sorry I don't remember its name).

The report supplied credible,  research evidence that the majority of folks do not mentally round up the price.

So a $19.95 is perceived as in the $19 dollar range and a $20 price is perceived as in the twenty dollar range. (even though there is really a one or five cents, difference between the two prices.  Go figure).

The majority of retailers do not round up the price.. So I suspect that the university findings, work in practice.

I understand that you wish to round up the prices,  (there is less printing involved). But you may be missing out on potential sales).

Nice X-mas hand made ornaments.

Regards,

SLAG.

 

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Look up "The psychology of pricing". It is a very interesting subject.

Consumer pays attention to the left digits more than the ending.

A round number ending in 0 like 20, is seen as a luxury item or 'no bargaining'. 

There is something with the prices ending in 4 and 7 but i don't remember right now. :) 

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Lol Neil.  Yeah, can save that 5 cents for.... well, they add up I guess. :)

SLAG, Thanks. It very well may be the mind going to the main dollar amount rather than the cents. I do wonder about potential sales when I do shows.  I got thinking about this when Frosty mentioned upping the price on some leaf hooks to $19.95 in another post. And mentioning sometimes the customer not even worried about receiving the nickel change. 

I'm a pretty simple person and like to keep things simple. But, yeah, I do wonder about if that might actually hurt potential sales? Most people that buy barely hmmhaw. There are those that really look intently then pass. So observing people that are checking out my work is interesting to me. It also gets me thinking about better displays or about pricing. The real pay is when someone sees something and their face lights up with a smile. The money just helps keep my lights on and tools working. 

Marc, I will definitely look that up. Sounds like an area I could always use improvement in. These are technically luxury items since it's art or hardware that otherwise could be purchased cheaper in a more plain form. For the most part I am pleasantly surprised at how I do at shows. I keep a book of what sold and how much, so I can track what sells. Also mark down if it was cash or card sale, just out of curiosity. 

Glenn, thats another part of why I think about it. Tho, many times I figure it's a bottom line figure for profit of mass produced resale items, but I'm sure there Is a psychological aspect to it. They literally have studies on colors, lettering, keywords, packaging and anything else. 

I'm not really worried about my pricing so much as curious of potential. Unlike the stores it wouldn't hurt my feelings to be "stuck" with or keep my work. 

Got some reading to do. :)

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I'm not an expert or a statistician, but I managed a restaraunt for a few years and worked in retail. I learned a lot about people's perception of things and businesses perform lots of studies in how to get people to buy things. For instance, milk is intentionally put to the back of the store. Say you just need milk. Well, since you have to go all the way back to the front, you then might decide while I'm here, there's the chip aisle. We may need bread. May as well grab this or that while I'm here. Instant upsale because of the flow and layout of the store. We sold cookies at my store. If there is only a few cookies, they may sit there all day long. But you fill that case up and they sell like crazy. The perception is, since there are so many, they must be fresher. Also, things are placed on shelves in certain places. People don't like to reach up or bend down to get things. The shelves at Wal Mart were scaled down shorter because women shop there more than men, so they can reach everything. Certain colors are placed in highly visible places to catch the eye. I'm sure there are a whole plethora of things I don't know about consciously besides some of the things I mentioned. I haven't done any sales booths or demos. But if I do, I will keep in mind some of these things.

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There are some other complicated behaviors to consider also.  I'll use a friend who is a local barber as an example.  For years her charge was $ 14 for a haircut.  She decided it was time to raise rates a little so she jacked it up to $ 16.

The thing is, at $ 14, a lot of people just gave her a $ 20 and told her to keep the change.  At $ 16 they do the same..so she isn't making that much more overall...plus a few customers thought that price to be a bit steep so have wandered off to find other sources fo hair mowing.  It's a total wash.

So...one has to consider some side effects too.  It's often hard to pin down that "sweet spot" where you profit the most but finding that point is the real goal. 

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Thanks for your insight CGL.

In the future I would like to build staircase shelves for at least one of my 6' sales tables for smaller sculptures to stand out better. I often get people looking at the tables and one will ask the other if they saw a certain sculpture and they reply that they hadn't tho they had walked past while looking at the table. Maybe they were just fixated on something else. It's a lot to look at on the flat tables. Often I'm restricted as to space so it's hard to lay it out more spread out, and keeping it all in a confined space with vertical displays on a table. All of that is still evolving. I much prefer having a 10'x10' display outside than being crammed into an 8'x8' indoor space that seems the usual. 

About the cookies, I often debate about that as well. With cookies it's the perception of freshness, but I often wonder wether it's better or worse to have multiple of one item on the blacksmith/ scrap sculpture table. Like maybe a couple or so but not a dozen (unless it were hardware and someone would indeed want multiples).  Could value be perceived as less if there are more of a single item? 

 

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I've noticed a lot more fudging on the unit pricing stickers too---some items will be priced per individual unit and some by the package----for the same type of items!  Makes it hard to compare prices which were what the unit pricing stickers were supposed to be for.  And of course there are the famous number of hot dog buns in a package vs number of hot dogs in a package...

At least my basic math skills are still there; I had a mini-course on "back of the envelope calculations" when I started College---probably a hold over from slide rule days when you needed to know where to put the decimal.

As for numbers: hard to sell things as unique handmade items if there are several dozen identical ones on the table---also a reason I tend not to use jigs for bending hooks.  All mine look individually done.  Of course some folks want identicals!

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Thomas, thats where my thinking goes on multiples on the table. When I do have more than one and someone is interested, I often invite them to check out the other(s) and pick their favorite as they are all hand made and none are exactly the same. 

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A far as multiples, I think a key point is figuring out how many of something to have. People like choices. If there's a lot, they feel like they can go through and pick the one they like. On the other hand, too many choices gets confusing or makes people have to study harder on what they want. Using the cookies as an example; If I tried keeping more than about 3 or 4 choices, the least favorites didn't sell as well. So, ended up being more waste. Chocolate chip, peanut butter and macadamia nut were the top sellers. Keep the case full of those and it would empty out quickly. I was better off to limit the choices to what people liked and bought most. But we're talking 3 for a $1.50 cookies. Artwork is a different ballgame. That's going to be a different kind of customer. I used to draw quite a bit and people were always asking me to draw them something. But on the occasion I suggested I'd sell it, we'll just say, there's a reason why folks are called " starving artists ". So I'd be interested in learning more about selling artwork myself. Forged or otherwise. Most of my forgings tend more toward the artsy side. 

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Mrs. C.G. Lady,

For most questions we are of like mind but I part company with your explanation of why milk other refrigerated milk products are situated at the rear of the store.

The stated reason is that, milk must kept under refrigeration. Milk quickly spoils. Milk trucks deliver milk at the back of the store. That rear placement enables milk less time to be at room temperature, during the transfer.

Yes,  you are right that there are many basic items placed at the rear end of the store to entice shoppers to linger longer at the store. All this to entice shoppers to spend more, per visit.

Hoping that we still remain friends,

Respectfully yours,

SLAG

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Slag, of course we remain friends! I suggest though that refrigerated products are delivered to the back of the store because that is where the cold units for dairy are placed. They could just as easily place them elsewhere. Milk man brought milk, but we stocked everything else like yogurt, cheese, etc. They like delivery trucks to be to the back, unseen and out of the way of customers and customer parking. Some places have side entries. But where I worked, we still had to take stock from the delivery bay in the back to its destination whether it was to cold or frozen storage. Meat was held in a cooler and freezer towards the middle of the store. Deli cooler was to the front of the store. So it still traveled from back of the store to the front.

Respectfully submitted for consideration and thought,

And your friend, CGL :D

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Dear Daswulf,

I understand your desire to "keep it simple, stupid" and price things in even dollar units but if you are doing things the right and professional way you will be charging sales tax of some odd percentage and still have to deal with change and total prices of dollars and odd cents.

This brings up the issue and maybe it needs a separate thread but how many people charge and how many do not charge sales tax?  I have done both knowing that I should when I don't and that I am too small a fish to catch.  In more recent years I have gotten a state sales tax license and charged and submitted my small returns.  It feels like I am doing my bit and not trying to fly under the radar and if some overly officious official shows up and is being a jerk I am golden.  Also, some shows specifically require vendors to charge sales tax and require a sales tax # to reserve a booth.  I don't think that charging or not charging sales tax makes any difference in whether or not you will make a particular sale.

I suppose that if you are at a small event and have a total of $50 sales over a weekend the hassle of sales tax may not be worth it.  However, if you are at a big event and doing several thousand dollars of business I think that it is wise to dot all the legal Is and cross all the procedural Ts.

"By hammer and hand all arts do stand."

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C.G. Lady,

Let us, respectfully, agree to disagree.

Milk spoils very quickly, a lot faster than cheese, yogurt, that spoil much more slowly.  (also deli, and frozen products), Yogurt is acidic and very few bacteria live in acid conditions. There are a few that do, like Lactobacillous spp.,Also a very few Streptococcus spp. e.g. Bulgaricus

(many of them ferment lactose sugar to lactic acid, etc.)

Yogurt is very acidic.

Hard cheeses have too little moisture for bacteria to survive, so they spoil very slowly. Their osmotic pressure is way too high for most bugs.

So those products are not as sensitive to warm temperatures, as milk is. (also frozen meats). Meats often have the anti-microbial chemical sodium nitrites, called 'cured' meats in the trade.

I acknowledge and do not doubt your experience in food retailing.

But Herr SLAG spent several years, working in, and studying food microbiology and thus is, also, familiar with the biology concerned.

I am delighted that we are still friends.

Please give a carrot and a cuddle for Sam for me.

Regards,

SLAG.

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Herr Slag, I have to agree with CGL about placement of merchandise in grocery stores. A while back I took several courses in psychology, one being about merchandise placement in grocery stores. This sort of confirms what I learned and CGL experienced.

Quote

Dairy departments are almost invariably located as far from the entrance as possible, ensuring that customers—most of whom will have at least one dairy item on their lists—will have to walk the length of the store, passing a wealth of tempting products, en route to the milk, eggs, cheese, and yogurt.

https://www.nationalgeographic.com/culture/food/the-plate/2015/06/15/surviving-the-sneaky-psychology-of-supermarkets/

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I apologize SLAG. I should have stated it better. I was trying to convey the idea that they COULD place the dairy section to the front, or closer to the front of the store. But it is strategically placed in the back forcing the customer past the rest of grocery. There were coolers and freezers located in other areas of the store, so dairy could be located and delivered to closer to the front if they chose to. Our local Tom Thumb has its dairy section located literally in the farthest back corner of the store. You have to go through other grocery aisles or HBA, (health and beauty) to exit to the registers. I meant no disrespect if it came off that way. I understand about food safety and temperatures, bacteria, etc. I had to take courses on safe food handling and those things managing a restaurant. I don't miss it...

Sam had a carrot from you and he and I are, and will remain your friends

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Just to stir the pot, I disagree with both to a partial extent :) Milk and that type of dairy stuff are high volume products where much more must be stored than is displayed.  Because of that you typically need a walk in cooler and the logical spot for that is the back of the store..sometimes the sides toward the back.  Displays are restocked from inside the walk in.  Walk in's also typically need a much larger compressor than your typical display refrigerator/freezer cabinet so you have to locate them where that compressor can do it's thing without being an eyesore or in the way..again, the back of a store typically.  One could theoretically put the walk in at the middle of the store..costco does this...but that actually hogs a ton of the much more valuable retail floor space than it does at the edge.  Costco only gets away with it due to huge volumes moving through the spaces.

So..though merchandising psychology does play some part, there are also physical considerations which supersede many of those aspects.  

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