A new experiment has found that by making slight adjustments to prices, it's possible to increase unit sales and revenue.



GoDaddy ran a test on its portfolio of aftermarket domain names using "charm" pricing - whereby numbers in prices are used to influence whether someone will make a purchase or not. The test included domains priced between $2,500 and $10,000 and saw an 8% increase in domains sold when the prices were changed to end with either 499 or 999.

The experiment also revealed that revenue increased by 22%, and the average sales price went up by 13%. GoDaddy stated that more domains had price increases than decreases to get to the desired price point of 499/999.

In future, the company plans to run tests to see if price decreases affect results, while another study is looking into whether prices ending in 111 could be more effective than lower prices that end in 999.

Pros and cons of using charm pricing to sell your domain name:

Pros:

1. Psychological Pricing Advantage: Charm pricing, such as $99 instead of $100, leverages the psychological tendency of buyers to perceive prices ending in "9" as more affordable and attractive. This can create a subconscious impression that the domain name is a better deal, even if the actual difference in price is negligible.

2. Increased Perceived Value: Charm pricing can make the domain name appear more valuable in the eyes of potential buyers. By setting the price just below a round number, you can give the impression that the domain is worth slightly more than the listed price, making it seem like a better investment.

3. Improved Conversion Rates: Numerous studies have shown that charm pricing can lead to higher conversion rates compared to round number pricing. Buyers are often more inclined to make a purchase when they see a price that is just below a psychological price point, such as $99 rather than $100.

4. Alignment with Industry Standards: The domain name industry has widely adopted charm pricing as a standard practice. By aligning your pricing with this industry norm, your offer may appear more familiar and credible to potential buyers who are accustomed to this pricing strategy.

5. Perception of Exclusivity: Charm pricing can create a sense of exclusivity or scarcity, as buyers may perceive the domain name as a limited-time offer or a premium asset due to the non-round number price tag.

Cons:

1. Potential for Perceived Undervaluation: Some buyers may interpret charm pricing as a sign that the domain name is undervalued or that the seller is intentionally lowballing the price. This could lead to a lack of trust and hesitation in the buyer's mind, potentially undermining the perceived value of the domain.

2. Confusion and Uncertainty: Charm pricing, while commonly used, may still cause confusion or uncertainty in the minds of some buyers. They may wonder if the price is negotiable, if there are additional fees or hidden costs, or if the seller is open to further price adjustments.

3. Difficulty in Determining Fair Market Value: The use of charm pricing can make it challenging to accurately assess the true fair market value of a domain name. Buyers may struggle to determine whether the listed price truly reflects the domain's worth or if it is simply a psychological tactic.

4. Limited Pricing Flexibility: Adhering to a strict charm pricing strategy can limit your ability to adjust the price based on changing market conditions, buyer interest, or other factors that may impact the perceived value of the domain name. This lack of flexibility could potentially result in missed opportunities or suboptimal pricing decisions.

5. Potential Perception of Deception: In rare cases, some buyers may interpret charm pricing as a deceptive or manipulative tactic, which could erode trust and damage the overall reputation of the seller or the domain name industry.

GoDaddy's reliance on "charm" pricing gimmicks raises concerns about the company's understanding of its customers' needs and preferences. Rather than focusing on providing value-added services or improving the overall user experience, GoDaddy is resorting to psychological manipulation to drive sales.

The fact that prices were adjusted to end in 499 or 999, often requiring price increases, may lead to customer dissatisfaction and mistrust in the long run. Moreover, the experiment's results may not be sustainable, as customers may eventually become desensitized to these pricing tactics.