Time to burst one of those old Direct Marketing Myths.
Offers with a price point ending in .99 (such as $199.99 or $29.99 or $99.99) will always pull a better response than any other price point.
Yes, it may pull a slightly higher response rate, but it will not help the bottom line, and in our business, that’s the most important line there is!
Over the last 25 years or so, I have conducted dozens and dozens of tests comparing price points such as $19.00 vs. $20, or $39.99 vs. $30. In every one, the bottom line was better with the B panel than the A panel.
Let’s look at a few factors.
First, there is the visual. $20 simply “looks” like less money than $19.99. This lesson came home to me when I wrote some old sweepstakes packages. We always make the prize amount look as large as possible: $1,000,000.00 (adding the zero cents.) But we always put any price point as small (visually) as possible: $20 for example. The prize looks bigger and the price looks smaller.
Next, there is the “No Dishonored Factor.” As your accountant or bookkeeper how many checks you get in your order pile that will become “dishonored” – NSF, Account Closed, Unsigned Check, etc. For some marketers, that number comes in as low as 10% and as high as 20%.
So, you will lose about 15% of your revenue through bad check writing. Yes, you can go after these people, but the rate of turn around from “bad” check to “good” check is low… very low. As low as 3%!
So, if the $19.99 price point pulled 5% response, and you lose 12 – 15% of those orders because of bad checks, you actually only generated a response rate of 4.25%. Now how does that compare with your test panel with the $20 price point?
Finally, there is the bonus of customers sending cash. (Before you go insane yelling at your screen that you never, EVER ask for cash on the order form, I will agree.) I do not ask for cash payments, but that does not stop a lot of people from sending cash. Would you believe as many as 25% of your orders will come in as cash! And cash never bounces. It is never dishonored! So now, the 12% bad check rate is only applicable to the orders with check, not the 20-25% of orders with cash!
You cannot bust this DM Myth if your price point is over $100, but if you are selling products, and they have a sales point of less than $100, then you should give this type of offer a try… it may prove to be money in the bank for you!
Peter T. Britton
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