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Hope this is interesting…

I’ve spent a considerable amount of time working on our pricing strategies and have conducted a lot of research.

I won’t bore you with the details but needless to say I’ve just spent hours reading very boring very dry academic papers written on consumer economics and value perception as it relates to price.

Based on what I’ve gleaned I have thrown together a rough table in the $1-$10 range (too hard to do more). The problem is that there is very little modern research in this field (that folks are willing to share, anyway) and so I needed to add all-new contexts and value comparisons to compensate for the fact that a movie no longer costs $2.

It turns out that people have learned to discard the .95 cents as largely meaningless and they round up or down based upon their perceptions of value. In a few cases though, the numbers become completely abstract and so people pin it to the value of a product that they understand.

The third column is largely subjective and we will each have our own social engineering stories to quote from. The value comparison really identifies what consumers think of when they attempt to contextualize the inferred value.

PRICE INFERENCE SACRIFICE VALUE COMPARISON $ 0.95 $ 1.00 A buck Bus Fare, Candy, Soda, etc. $ 1.95 $ 1.00 Loose Change ” $ 2.95 $ 2.00 Pocket money A light snack, bridge toll $ 3.95 $ 4.00 Almost five bucks Burger & fries $ 4.95 $ 5.00 Five bucks Movie Rental $ 5.95 $ 5.00 Five bucks Movie Rental $ 6.95 $ 7.00 Three bills Movie Theatre $ 7.95 $ 7.00 Three bills Movie Theatre $ 8.95 $10.00 Ten bucks! Lunch $ 9.95 $10.00 Ten bucks! Lunch $10.95 $10.00 Ten bucks plus Lunch some change

I’m not going to vouch for the accuracy of this just yet, but these are the talking points and this is part of an ongoing process. It’s my first attempt at empirically defining these price sensitivities.

-Ian.

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