Wednesday, November 6, 2013

Psychological pricing vs Float Pricing

What is Psychological Pricing?
Psychological pricing or price ending or charm pricing is a marketing practice based on the theory that certain prices have a psychological impact. The retail prices are often expressed as "odd prices": a little less than a round number, e.g. $19.99 or £2.98. Consumers tend to perceive “odd prices” as being significantly lower than they actually are, tending to round to the next lowest monetary unit. Thus, prices such as $1.99 is associated with spending $1 rather than $2. The theory that drives this is that lower pricing such as this institutes greater demand than if consumers were perfectly rational. Psychological pricing is one cause of price points. (Source)

This Pricing does not only gives the false idea that something is cheaper than normal but also means your will be undercutting competition that are selling a Magic Online card for the "same" (0.01 more) price. This also means that your bot will be listed first on wikiprice when sorting by price and so on.

(Example of Psycological pricing on a well known bot chain, Buy on left, Sell on right.)

This sounds like a straight foward better option when it comes to pricing cards, but there are many situations where "float pricing" can be used in your advantage; Specially on Magic Online.

Float Pricing
Float pricing is a pricing method that takes advantage of the credit system in Magic the Gathering:Online. Pricing a card at 15.01 will benefit a regular customer with saved credit (against a newcomer) as they are likely to be able to take the card for just 15 Event Tickets (plus 1 cent credit). The main advantage of this are the extra sales you will make with this technique with new customers and the reduced amount of "raiding" trades. The same can be done to buying prices (ending on .99).

The way this method helps against raiding is quite simple. If a card is worth between $11.75 and 12.25 and you have it priced at 11, the chances are that you will sell it very quickly to a non regular customer for 11 that will never come back. Having that card at 11.01 means that you will either sell it to a regular customer for 11 Event tickets (while a raider with no saved credits wouldn't take it); or, with a bit of luck, will result in a trade like the one I had bellow last month. 

(on this example you can see one of the big advantages of the float pricing method)

While the trade above was happening I was lucky enough to watch the whole process. The Customer started by picking up the Polukranos, World Eater card, which I had manually priced at 11.01 Event Tickets.

on this specific day that card value spiked up to over 13 Event Tickets

 The Customer had no credits so the bot quoted 45 tix (saving 0.96 credit). If the card was priced at 11.00 the trade would be over within seconds and this person would probably never use my bots again unless he found another great deal in the future.

What happened was completely the opposite to the typical "raiding trade", the customer after a minute or two, started picking other cards trying to round things up to 45.0 so he wouldn't leave 0.96 credit. All the other cards he needed were worth between $2 and $5, meaning that the end result would never be near the 45.0 mark.

On the end this Customer ended up picking up all his needs from my bot resulting in a overall small profit (even though the Polukranos, World Eater were sold quite under the fair price). 
Needless to say that all the other bots that sold the card via "psychological pricing" at 10.99 and even at 11.99 on that day, made a worse deal than me selling this whole package.

This person is now a regular happy Customer... :D

Please comment or share your success stories!

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