Selling on Amazon #3 - Left-Digit Bias

+ECON's "Selling on Amazon" series includes tips on how to successfully sell products on Amazon based on experience and economic principles:

Post #1 - Background & Invitation to Become an Amazon Seller
Post #2 - Quasi-Hyperbolic Discounting
Post #3 - Left-Digit Bias (below!)

Post #4 - Condition Notes

Tip #2 - Use Left-Digit Bias (LDB)

Sadly, I don't have a video on this yet, but if you really want something, listen to these while you read.

LDB (or "left-digit effect") is a big reason why prices are listed as $1.99 instead of $2.00.  Our brains like shortcuts, or "heuristics", when solving problems and making decisions. When evaluating numbers (e.g. prices), we put more weight on the left-most digits, even when there's a lot of money involved.  For example, our brains like to think the difference between 1.80 and 4.10 is larger than the difference between 2.10 and 4.40, but both sets have the same difference.

Let me reiterate that this effect can be very costly.

Let's apply LDB to Amazon pricing. This one's easier to apply than my last tip. First, list prices below even numbers (e.g. list $49.88 instead of $50.00).  Second, list prices more than a dollar below the next listing so you appear the obvious winner. 

For example, I like my price to appear much better than the next guy down, so I usually price whatever I think makes it look like the next listing down is $2 more.  Listing one cent lower doesn't usually bother the customer, but if the seller below you has listed a product for $95.00 and you list for $93.89, your price looks much better.  This is especially true if you can get the left-most digit different (e.g. $88.99 vs $90.00 - I'll add here that I don't do $X.99 prices because I think many people have a heuristic to auto-round a number ending in .99; no research to support this, just my gut).

Pretty simple, right?  Now just make sure you aren't affected either!  It's usually worth spending an extra two cents or dollars to purchase from a higher rated seller, just like it might be worth giving up a dollar to outsell a competitor.  

This also implies you should never get into price wars over a few cents - often a competitor will see your price and lower theirs to $0.01 below yours and you wonder "should I lower my price now? How far will this go?!".  Rather than starting a price war that hurts both of you, and as long as your two left-most digits are the same, why not raise the price a few dozen cents?  Most customers won't notice, and those who do will be willing to pay more because of your excellent condition notes, which is what my next post is on!

Let me know your thoughts in the comments or on Twitter: @plusECON - cheers!