S1 Ep2 - The first number wins

You know, $99 and $100 are basically the same. But your brain doesn't treat them that way. The first number changes the whole story. Today we're unpacking why the first digit wins. If you price anything, this is not optional. Welcome to ThinkShift, the podcast where neuroscience meets business. This episode is for you if you sell anything with a price tag, a plan, a package or a rate card. You'll learn why the first number anchors value before people think. And you'll learn how to use it without feeling gimmicky. Hi, Leanne. Hey, Clint. How you doing? Yeah. Good to see you too. So. So Leanne, why does the first digit have so much power? Even when people know the trick. No, it's funny, isn't it? I mean, I fall for it. You fall for it. Every time. You fall for it. And it's because we put so much emphasis on that left-sided number and not the right. And it's got it's called a bias. It's called left-digit bias. And so what happens if we think of a price, let's say, three dollars and then we look at something that's two ninety nine. The magnitude of the number two is a lot less than the number three. So even though there's only one cent difference, one cent, it seems like a dollar. And even though we know that and we're going to a superman go, aha, I know what you're doing. It doesn't matter. If we had something, the same product and it was say three dollars and five cents and this was two ninety nine, which is six cents difference. It was exactly the same. We go that's so much cheaper. But in fact, it's not. It's only six cents cheaper. So what happens is the brain. It's called prospect theory where we create heuristics or shortcuts. And the brain looks at things and interprets things a lot quicker than we actually then realize. And so it looks at the numbers and goes, right, that's cheaper. Well, that's less. Let's go for that. Do you think conscious knowledge does not remove automatic perception? No, no, no at all. That's why you just go, yes, I knew that, but I'm going to get it in. Yeah, that's right. Yeah, but normally you go afterwards and go, ah, bought that. I know why. Yeah. Yes. It's a very effective behavioral economics tool and it's used a lot overused. Sure. We'll come to that. But definitely is it is effective. It's powerful. I mean, to be honest, this quietly, I use it. Do you? Sometimes. Yeah. You've already moved into the science behind things and we're going to keep going with that. Sure. Why does ninety nine dollars feel meaningfully cheaper than 100? Like what is the why? Yeah. So because firstly, in that instance, in that example that you're using, we're looking at three significant figures versus two. So we've got three numbers or three digits versus two digits, but we're looking at the difference between the ten and the nine. So the nine seems a lot less than the ten. And it's more effective if we are using sense. So that because it's a lot more obvious. So with a short cut, we look at the number. When we go that's cheaper, I'm going to take that. So a lot of pricing and it's really effective. Even if we're doing a hundred dollars, you go to ninety nine, a hundred thousand dollars, we can go nine, nine, nine, nine, nine. I mean, that's obviously in your face as a little bit obvious, but it still would have the same effect. Yeah. A hundred and fifty thousand. If we look at a hundred and forty nine thousand, rather than a hundred and fifty thousand is significantly cheaper, even though it's not that much in the scheme of things. So the brain will look at that left digit and it will interpret that left digit, compare it to the right digit. And if it's less, then we think it's considerably cheaper because the magnitude of the number is smaller. Does this only happen with money? Not necessarily. The main effectiveness is around money and because of the perception of price, but it can happen with other measurements as well and other numbers as well in terms of, if we're counting certain things, but money particularly, it is the most effective because of the value perception that the number has. What makes left digit bias feel manipulative? That's really interesting. And it's funny that you say manipulative because we always talk about how much we dislike being manipulative and how that is an absolute no-no in business, but you're right. It can. And for the buy, they can look at and go, "Oh, you're trying to do something here." So it's when it's really obvious. When it's really, really obvious. And we do see it every day with smaller products or smaller price products. But what also happens is it becomes super duper obvious and more, not so much in our market, but more in the US market where they're since. They have a one cent and a two cent piece. We don't hear, our currency is five cents. So where we see a 2.99 or 2.97 or 2.93 and one of the questions that comes up and used to come up quite a bit, remember that was that everyone had online courses. They still do. And they still have a lot of online courses. And it would be 1.97. 1.02.93. There was all these odd numbers. $47 down there. Yeah. And there was an epidemic. It was epidemic of these odd numbers. And I have an odd number, but it was epidemic of these odd numbers and these funny pricing for these mainly online courses. There's something that happened during COVID, right? And people came out and thought they were being smart. But they actually weren't. They were trying to use left-digibious. But it actually wasn't working. So the thing is, it's got nothing to do with what that number is at the end, whether it is. 99, 97, generally, it was odd 95, 93. It's the fact that if it was 197, it wasn't 200. Or if it was 47, it's not 50. But it became so obvious, right? I mean, I used to look at it and they have a little bit of a chuckle. I mean, did you used to see it a lot, Clif? I saw it, but particularly because I was in the fitness game producing books, downloads, PDFs, it was always a $47 PDF, always. And I always wondered why. So here we are. Yeah, yeah. So, but it became so monotonous and so over you, it's that people started getting sick and tired of course it's 47 and of course not 50. So it became obvious and that is dangerous. And is it manipulative in a way? Yes. So they were using it for the wrong reason really. And why couldn't have it been 50? Would people still have bought it? Maybe not, but it was just so obvious that it became dangerous. So that is a really good example of manipulation that we should stay clear of. And one of the things going to happen now that we've brought it up, Clint, is that our listeners are going to go out there and go, I know what you did left it your price. Left it your price there. They will. And you know what? That's great. That's great. We're educating them and that's what we're here for, right? That's right. Yeah. So there's this application, one interesting thing which is probably the converse situation of that, particularly in the service industry where pricing when it's rounded feels fake. Like if you're looking at, it's my cost is 4000. It's a common, I mean, how'd you get that figure? It sounds like you pulled it out of the air. Yeah. Whereas if it's slightly less than say $4,000 normally, now it's $3,980, suddenly it sounds legitimate. Yeah. And you've thrown in another factor there that you've actually got those second last digits rather than being $3,900, $3,980. And that can actually support the left digit bias. And it's weighing up. Okay, do I want another $80? Well, if you're going to get the sale, you're going to get it on. So yes, round numbers can be convenient, a little bit too easy. What I find and what I teach is that you haven't put any effort in. And I had a client who was a builder and their quotes were ginormous. They were in the millions and they would quote, you know, 1.8 million. Oh, is that right? There's all these things that are listed on the pricing schedule that was pages long and just conveniently you came to a total of an even 1.8 million. Yeah, I don't think so. And so who's going to believe that? So that's where I was getting them to use some odd digit in their pricing and particular left digit pricing. So we have 1.7, 980, you know, blah, blah. And that's really it. And to be honest, that's real because you're not going to add up all your components and it's going to come to an even 1.8 million. It is going to be a little bit odd. So be honest. Yeah. So the consumer what it is you put in effort, you've had to add all these up and this is what it's coming to. I often see a deal a little work on on pitch decks and whatnot to get businesses ready for investment. And when they have the ask page on their slide deck, the ones that are not rounded up seem way more legitimate. Yeah. And this is the feedback I get from a lot of the investors around this is to say that figure it needs to be odd. And they'll say it to me to say because it just seems made up. Absolutely. So that you're just plucked out of the air. Yeah. Which we have. Yeah. Yeah. Round about. Yeah. Round about. Yeah. The one industry though, there was a little bit of my hate discrimers. We we just published that last episode. But there's one one. industry though, and this is because of learned behavior is the real estate industry. If we're buying a house, selling a house, and we see all these odd numbers, we actually start the opposite effect. Interesting. So we are conditioned technically, even though it would be more powerful if it was, there were odd numbers, it would be, it would condition to not think like that. So if we see it, we go, oh, that's not right. If a house is, I don't know, 980,000, rather, 987,252, it's, it's, yeah, right. Yeah. So that one industry, and so when I do speak to real estate agents and buyers agents, and in that industry, that's one thing they do need to be careful of, is the rounded, then the wholesomeness of the number is really important for that industry. But that's about all. Okay. Yeah. Well, I know I spoke a little bit about business application, and I just want to go into a little deeper now. Yeah, sure. Where should brands use left digit bias and where should they avoid it? Okay. So definitely in your proposals and your quoting and pricing, it's, it's, it's very effective. You want to assimilate, you put effort in. So it's not about shrieking and manipulating the customer. It is about showing that it is a wholesome price. There are a lot of components. Even if they're not a lot of components, there are multiple components, more than one, that need to add to a number. So put in that effort. You're expecting to get a sale. You want someone to be your client or you want to sell a product. Put the effort in. Absolutely put the effort in. So it does work in also thinking that it is slightly cheaper, even though I might only be $10 cheaper. So making sure that it is legitimate number, that you can effectively use left digit bias and it's going to be okay. It's not going to be manipulating your customer. The one thing that you need to be careful of and where it can backfires when it is super stupid obvious and when you are using it for very, very, very high premium products. So for instance, a good bottle of wine. For good bottle of wine is $99 or good bottle of wine is $100, which one are you more likely to buy? Yeah. $100. Round numbers and that and the roundness of numbers. So round numbers themselves, but how it visually looks round is a perception of elitness, is a perception of exclusiveness. And we want to pay a round number for a premium product. So there is a post that I did in Friday Fun Facts, which is where we've based a lot of now, I think shift ideas from around wine that was $49.95, which is the left technically, a left digit bias is compared to 50. And in this study, most people, the majority of people bought the wine at $50, even though left digit bias was there, people didn't fall for it. They actually wanted the premium price for the premium product. Okay. Then if you sell premium, should you still use it at all? So again, depends if it's a product, sure, if it's a service, no. Okay. In a nutshell, because services, there's a lot of components. There's a lot of bits to it. I want to see that you're putting effort into give me the best price and the best proposal, the press pricing schedule for what I'm doing. I don't want you to conveniently come up with a number that's rounded, even if it is a premium service, but for products, more so for premium products. How should this influence, I know you touched on proposals just briefly there, but how should it influence proposals and service pricing? So well, it needs to be ethical. That's the first thing. It shouldn't be the first thing you think of. So it shouldn't be, well, the first thing I'm going to do is concentrate on that left digit. The pricing itself needs to be your pricing and then you change it and you adjust it the way that you see fit if you see fit. So using it is always a way to change the perception for the consumer, but it needs to be correct. You're not going to be, and again, if something is $10,000, making it $9,980 or $90, not using $9,999. I mean, it's so obvious that it's going to actually backfire. But making sure that it's clear, making sure that it's real and using it to a certain effect. What also happens if you need to be careful, once you get into more than four significant figures, so he's going into five digits, so 10,000 above, you need to be careful how you use that because punctuation starts coming into it where we will put a comma after the first two digits. And it inflates the number size. And it inflates the number size because it looks longer, it might sound longer, potentially has more syllables. These are all parts and components of pricing psychology. So left digit bias is an as effective. So looking at the scope of your pricing and rather than put, like I mentioned before in that example, 150,000 versus 149,000 or 149,500, you're not going to do 149,999. You're not even going to really do 149,990. It needs to be something substantial. Otherwise, it just looks silly. I know you just touched on their syllables. Just want to go into that deeper. So for instance, seven is two syllables, five, one. So big difference. Huge difference. Huge difference. A little little little little little bit of insight into how I operate. You'll never see a seven on my pricing ever ever too many syllables too many syllables too many syllables mental. Yeah, everyone do the same thing. I got to write that down or the save that part of the podcast. Yeah. It doesn't exist. It's all the same. We're about six seven six seven. I know there's no more. But that's the thing. There is no. There's no more. There is no. You'll never see a seven. So nine, you know, eight, five, like you were saying, absolutely. And so what happens is with the syllables is that we phonetically say, which is saying it in your mind without voicing it. So there's no vocals. It's just saying it in which we all do. We think we don't we do. We always do. So we phonetically say something in our mind. So if I say $57.70 instead of $58.80, there's seven syllables versus five. In fact, there was a study around a product that was $57.70 and the other product was the same product. It was priced $58.50. So there was a $80 difference and the $58.50 product sold out $57.70. It's remained on the shelf. Interesting. Yeah. And even though it was slightly cheaper, the more expensive because it sounded cheaper because if you read it, it looks smaller. If you phonetically say it, it's smaller. Therefore, it has to be cheaper. And that's again, coming back to heuristics and how the brain processes information. OK, so the question is not should we do $0.99 or $0.99. The question is, what story does that first digit tell? Here's a shift. People do not read prices like a calculator. They read them like a shortcut. The first digit creates a category and categories drive decisions faster than logic. One practical action for the listener this week. Or at your pricing page, ask what category does the first digit put me in? Is that the category I want? That's the shift. I'm Clint. I'm Leon. I'm a shift in under 30 minutes. 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