It's hard to believe that Amazon would take such a radical step unless they were fairly certain that across-the-board discounting was no longer driving higher sales. Which means they've got some research behind the strategy.
Given all the renewed attention to the study of prices, it's likely that a number of time-honored pricing strategies will gradually fall by the wayside.
There is one pricing strategy, however, that's turning out to be amazingly resilient, even though it's both painfully obvious and faintly annoying: ending your price with the numeral "9."
The classic study of this phenomenon, published in the journal Quantitative Marketing and Economics, encompassed three field studies where different price-points were offered.
According to the researchers:
The data yield two conclusions. First, use of a $9 price ending increased demand in all three experiments. Second, the increase in demand was stronger for new items than for items that the retailer had sold in previous years. There is also some evidence that $9 price endings are less effective when retailers use "Sale" cues. Together, these results suggest that $9-endings may be more effective when customers have limited information, which may in turn help to explain why retailers do not use $9 price endings on every item.
Thus, though the difference is negligible, a product priced at $1,999 will tend to sell better than the same product priced at $2,000.
Surprisingly, the research also showed that a product priced at $1,999 will tend to sell better than the same product priced at $1,995.
So it's not about the savings. Apparently there's just something about ending the price in a "9" that nudges people to buy.
Force of habit, maybe? Nobody seems to know for sure.
BTW, this is not just corny Home Shopping Network stuff. Even Apple uses the "9" trick; the base prices of the iMac, for example, are $1099 and $1499.
I'll be posting more about pricing this month, so stay tuned.