In the previous lesson, we mentioned that rounding prices to full tens or hundreds can appear unnatural to customers. However, we tend to default to rounding when it comes to higher-value amounts. For example, when selling an apartment, no one sets the price with penny-level precision in hopes of earning slightly more. But it turns out that the human brain perceives such pricing differently.
As shown in a study[1] based on 27,000 real estate transactions by Thomas, Simon, and Kadiyali, buyers were more willing to pay a higher price when it wasn’t rounded (e.g., 432,982.15 PLN instead of 430,000 PLN). What caused this effect?
It turns out that this relates to how we associate certain pricing structures. When do we care about precise endings in prices? When dealing with low amounts. Therefore, seeing an ending like 0.15 PLN leads our brain to categorize the price as part of a low-price range, which influences the overall perception of the offer.
Surprisingly, this leads to the following conclusion:
Statistically, people are more likely to purchase an item priced at 432,982.15 PLN than at 430,000 PLN, because their subconscious classifies the price as belonging to a lower price range.
[1] Thomas, Simon & Kadiyali, 2007
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