New test suggests price tweaks can lead to higher unit sales and higher revenue.
GoDaddy recently released the results of a charm pricing test for aftermarket domain names.
Charm pricing, also known as psychological pricing, is the concept that the numbers in a price influence whether someone will purchase them or not. This is one reason you see many things priced as x.99. Psychologically, it seems cheaper than rounding to the nearest dollar.
Using a subset of its NameFind portfolio, GoDaddy tested the impact of changing aftermarket domain prices so they ended in 499 or 999. For example, a domain priced at $8,799 changed to $8,999.
The test showed significant improvement in sales priced between $2,500 and $10,000 when switching to $499 and $999 endings: NameFind discovered that sales revenue increased by 22%, while the number of domains sold increased by 8%. The average sales price also increased by 13%.
Charm pricing typically suggests that people look at the leftmost number more than the right. But this test suggests that people like 99 at the end. After all, why would a domain priced at $8,799 look cheaper than one priced at $8,999?
After seeing the results, I had a question: What percentage of domains moved up in price, and what percentage moved down? Perhaps some of the sales lift was from domains previously priced at, say, $3,099, moving down to $2,999.
GoDaddy told me that more domains had price increases than decreases to get to the 499/999 price point. This makes sense as the revenue increased much more than the unit sales, and the average price also increased. (This also brings up the question of price elasticity of demand for aftermarket domains.) GoDaddy does not have separate test results for the domains that increased in price. In the future, the company will run experiments to see if price reductions impact the results.
Another test NameFind is running is for domains ending in 111. One study suggested that for four-digit pricing, prices ending in ,111 might look cheaper than a lower price ending in ,999.