Richard Gottlieb

The Power of Precise Numbers

I noticed a number of years ago that when I gave an exact number rather than a number ending in zeros it seemed to have an interesting impact on people.  They took it more seriously. 

For example, when I would do a presentation for a large chain, I would include revenue and profit projections.  Well as we all know, projections are just that, projections, so they really aren’t in any way exact.  So, when your projection turns out to be something like $1,347,433 the tendency is to round it off to $1,347,000 or even $1,300,000.  What I found, however, was that when I left the small digits on the end, people tended to take the projection more seriously.  The power of the exact number was, I thought, my little secret.

Well, it appears that I was not the only one who came to the conclusion that precise numbers have power.  The Atlantic magazine in an article on its website entitled "Pound Foolish" cites a Cornell University study in making the case that buyers will see a number ending in numbers other than zeros as being cheaper than one ending in zeros even if it is higher. Huh??? 

Here is how the article explains it:

If you want to save money, don’t count the pennies: they may be just a ruse to distract you from the higher number on the other side of the decimal point. A recent paper suggests that because we tend to use precise numbers for small amounts and round numbers (lots of zeros) for large ones, sellers can make buyers perceive a price as smaller than it is by replacing zeros with other digits. The authors showed their subjects a listing for a house along with various prices, and asked whether those prices seemed high or low. Precise prices like $391,534 were seen as cheaper than round ones like $390,000, even though the round prices were actually lower. The authors then examined more than 27,000 real-estate transactions on Long Island and in South Florida and discovered the same effect at work in real-life deals. 

So, if you are a salesperson who deals in large numbers you may want to consider the use of other numbers rather than zeros.  If it is a projection the customer may take you more seriously.  If it is a price, they make think it’s cheaper than it is.

Posted by Richard Gottlieb on February 26, 2008 | Comments (0)