This article on pricing strategies was near the top of Hacker News today. It’s a really excellent read for anyone consider how to price a product. Here’s a quote:
The Nine and Zero Effect. People associate the number nine with value and zero with quality. Look at the difference between fast food and a gourmet restaurant. A burger meal can sell for about $4.99 while a gourmet entree at the best place in town may go for $30. So the psychology of pricing isn’t so much about gaining additional sales because the price appears to be lower, it’s about what the price communicates about your offering. So which do you want to communicate? Value or Quality? Now you can price accordingly.
A few months ago I wrote some poker software that I intended to sell online (more on that in another post). I changed the price seven or eight times before I released the final product. The price went from $25 to $29 to $35 to $40 to $39 to $34 to $10 to $0.
That curve pretty much reflects my optimism about the project too…