Pricing Strategies & Advertising Fun, Volume 2

Here is a bit of pricing philosophy for you: The old 995 number works consistently no matter what you think about it. It will continue to work that way because it is an optical illusion. Here's what I mean: The difference between $26,147.50 and $25,995.00 is $1,000.00 not $152.50. The number most people will focus on is the second digit. It is the way it is, so you might as well take full advantage of it. I have.

I know what you're thinking. . . you've seen that so many times that you think the customer is tired of it and so you will set yourself apart and do a different number like $25,688.00 or $26,347.00 or something like that. The "95" is out of favor. Okay, go with that if you like, but you will make more gross by getting on board the "95" bus.

If you are determining that a good, competitive price for your unit might be $25, 455.00, my recommendation would be to see if you can live with $24,995.00. If you can, you will get a better, more harmonious result. If that is too low, my recommendation would be to move it up to $25,995.00 and make $550 more profit. Unless your customer is making their final decision on a few hundred dollars and they are essentially then a price buyer, I say that both those prices are the same since the second digit is a 5 in both.

Now, I also have a book business and $9.95 is $10.00 cheaper than $10.76 unless I have just a price buyer, of course. Well, I know that only 4% buy price, so I'm focused on the 96% anyway, so I go with the same strategy whether it is a low priced book or an expensive commercial upfitted truck. It works. It's hard to argue with success.

If I am taking a low end flatbed and pricing it for the price buyer and to attract attention with a very low price, here is my strategy: I take the invoice amount, less all the legitimate manufacturer cash incentives and that would be the amount of my "cost." I look at where that number is relative to the nearest 1,000 mark. So, let's say that the number comes out at $25,267.00. If I am really trying to make an impression, I might go into the negative and sell it for $24,995.00. I've done it many times and it proved very successful. If not that, or if I felt that it wasn't quite that important, I would go with $25,995.00 or $26,995.00 depending on how I felt those numbers would do the job I wanted them to do.

This strategy is even more important at the first digit number. Let's say we use the above strategy on a more expensive diesel truck and the cost comes out $30,277.00. I would do everything I could to get to $29,995.00 in this case and if I couldn't or didn't really feel a need to, then I would go upward to $32,995 or something like that. In other words, I would feel comfortable jumping substantially higher. If I can't get there (or don't want to), I might as well go for the gusto. So, generally the first and second digit is what I focus on and it is what most people focus on. You might as well make the rest of the numbers mean something to you.

Whenever I see a dealer advertising $31,188.00, I just feel that they are just throwing $800 down the drain or missing a golden opportunity to get to that lower $30,995.00 number and sell it for $1,000 less. I see this kind of thing quite often. I encourage you to develop a strategy of how you price things and why and keep track of how these different strategies work so you can know what works best for you. It is a very important part of being effective and profitable.

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