Science and Tech

Substack works better for €10 than €9.99. An axiom of behavioral economics is overturned

The Decoy effect, or how brands manipulate your mind so that you buy what they want

One of the axioms in marketing and pricing says that the digit on the left must be reduced by one. That is, if we have a product at 5 euros, we must find a way to convert that 5 into a 4. The result is usually 4.99. This is how most prices in the world work: 19, 99, 999 or 9,990 euros: a ruse to camouflage its real cost to which others can follow, such as putting the ‘4’ very large, and the ’99’ much smaller.

It has all the sense of the world. Thomas and Morwitz experimented with it in 2005. drawing a clear conclusion:

“…when evaluating “2.99”, the process of coding magnitudes begins as soon as our eyes meet the number 2. Consequently, the perceived magnitude of 2.99 is anchored to the digit that is furthest to the left (that is, say, 2) and becomes significantly less than magnitude 3.00” (page 55).

However, Substack has done better by setting prices that do not insult our intelligence. A finding that has surprised them.

It may not be extrapolated, but it is an unexpected pleasure

according to account Gergely Orosz, Substack has experimented with its pricing. They were usually round ($5, $10), but he tried the tactic of moving the left digit down a digit, thus making it either $4.99 or $9.99.

“Compared to round number pricing, displaying prices of $X.99 caused a significant drop in the conversion rate from free to paid,” the platform explained. newsletter.

This does not have to mean anything that is universally applicable, although it may weigh us down, since the type of relationship that Substack establishes with newsletter authors is different from the transactional relationship that we establish with Spotify, Netflix or at the time of buy some slippers

However, it is striking that someone has verified on their platform how they do not always apply what appear to be unchangeable universal principles, especially when they’re the kind we assume work even though it’s obviously basic mental manipulation.

Journalists who leave their newsrooms (some very angry) and set up their own medium

The company has had similar surprises in the past. For example, when you discovered that some of your top paid posts in terms of monthly revenue were not functioning as a porous paywall. That is to say, they did not allow reading only a fraction of the text in the open, leading to payment to read the full version, but they directly offered the complete texts in the open.

Same with publications that didn’t directly offer any benefits to paying subscribers: their subscribers agreed to pay as a way to support the writer’s work or to reinforce him and make sure he could continue doing his work on Substack for a long time.

Perhaps the idiosyncrasies of Substack and the way we relate to those who provide the content do not allow us to extrapolate their experience with the pricing beyond its borders, but at least it is a relief that in certain environments we are not as manipulable as we assume. Now Substack has strengthened its reliance on round number pricing, which is much more honest by the way.

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Featured Image | Mockups Studio, Xataka.



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