Pricing Strategies for Domain Names

I was reading an interesting thread over at NamePros about how to best BIN price your domains. Companies like BuyDomains and Mike Mann’s DomainMarket are well-known for pricing their domains ending in 88 rather than using round numbers.

The well-documented psychology behind doing this is that round numbers feel larger, and that by knocking off a few bucks you make the price seem more affordable, which will hopefully lead to more sales. But does it?

I read a study last year that had a different take on pricing psychology, if I can find the link I’ll update this post. The study found that if you want to evoke an analytical feeling in your buyer, one that will lead to them doing more research, you should use specific numbers like above.

Conversely if you want to evoke an emotional response ideal for impulse purchases, round numbers are actually better. Basically a price of $488 will make them stop and think, maybe research comparable sales, etc. while a price of $500 might make them pull the trigger without hesitation.

Relating this back to domain names, the general rule of thumb is that prices $5k and below are impulse purchases that generally don’t require owner/board approval, and prices above that amount are usually scrutinized more by stakeholders. So applying this psychology to your own business, it might be wise to price your lower-end domains with round numbers like $1,500 and your higher-end domains with specific numbers like $24,888.

While very few of BuyDomains prices are round numbers, I wanted to find out how many of their sales actually end in the famous 88 and if there is a better option. Below is a chart of the Top 10 “endings” on their prices for 6,275 of their publicly reported sales, including how many sales had that ending, the total dollar amount, and the average sale price.

EndingNum SalesAmountAvg Price
003360$7,940,900$2,363
881084$2,684,692$2,477
50500$911,800$1,824
16145$272,820$1,882
6698$214,368$2,187
4497$160,368$1,653
4169$138,429$2,006
7562$120,250$1,940
9446$82,124$1,785
9142$86,122$2,051

You can see that round numbers ending in 00 were more than 3x more likely to be the final sale price than 88, and numbers like 99 and 95 weren’t even there. Below is the same table but for DomainMarket, which we only have 117 publicly reported sales for, so the results are not as statistically significant but are still interesting.

EndingNum SalesAmountAvg Price
0085$1,659,800$19,527
8823$332,424$14,453
503$32,850$10,950
342$4,868$2,434
992$4,098$2,049
801$19,880$19,880
101$7,910$7,910

The results are the same, an overwhelming majority end in 00 despite the pricing ending in 88 for pretty much every domain.

Obviously this is probably due in large part to negotiations over email or phone, perhaps the brokers are more inclined to use round numbers when making counter-offers. But still, what actually got someone to pull the trigger was a round number a majority of the time.

The idea of BIN pricing is to get someone to make the purchase right away without any negotiation, and clearly 88 is only doing the trick about 20% of the time for DomainMarket and about 17% of the time for BuyDomains.

Perhaps you should consider using round numbers when BIN pricing your domains.

Michael Sumner is the CTO of NameBio.com, and is the lead developer at State Ventures which owns and operates geo domains such as OceanCity.com and Maryland.com. Michael is also the co-founder of DN Media, a company that has been involved in seven figures worth of domain name transactions.

8 thoughts on “Pricing Strategies for Domain Names

  • By Dan Gustafson - Reply

    Sales psychology for domains… love it!

  • By Frank Mueller - Reply

    00 3360 $7,940,900 $2,363
    88 1084 $2,684,692 $2,477

    so how can a lot of sales ending ->00 result in an average of ->63 ?

    you are mathematically right
    but that only shows your numbers are missleading

    to me an average of
    $2,363 versus $2,477
    means that a lot of domains sell for $2.4 K USD

    and domains are not potatoes
    when you don’t mind which you get

    every domain is different

    statistics are nice
    but only for a blog post..

    • By Michael Sumner - Reply

      Just because all of the sales end in 00 doesn’t mean the average price has to, that’s just basic math. Each domain being unique is irrelevant to this discussion. This is about whether any given domain would be better off priced at something like $1,488 vs. $1,500 based on psychology, it doesn’t matter what the domain is.

      I think you’re misunderstanding the results in the table, the average price of a certain ending is not the main focus, it is the number of successful sales. It was significantly more likely for a successful sale to end in 00 than a specific number like 88, 99, 95, etc.

      I included the total number of sales and the average price so people could see at a glance if, for example, 88 had fewer sales but had a significantly higher average price.

      So let’s say hypothetically the average price of 00 endings was $2,345 but the average price of 88 endings was $10,456, that would tell you specific numbers work better for higher-end domains and round numbers work better for lower-end domains.

      But that wasn’t even the case, successful sales were much more likely to have round numbers in every price range. I even split the data into sales $5k and below, and sales above $5k, and the distributions were almost exactly the same… 00 was significantly more likely to result in a sale.

      Hope that makes sense… there’s nothing misleading here.

  • By Frank Mueller - Reply

    just because the sales price was ending 00
    that doesn’t tell you anything about the negotiation flow

    Did you check the initial asking price?

    so asking for $4888 may finally result in a sale of $4500

    the real question is not the sales price
    but which price best initiates the discussion
    that leads to the sale

    • By Michael Sumner - Reply

      The point of a Buy it Now price is to get someone to… buy it now. Not to initiate a back and forth that eats up your time. If your goal is to negotiate just do Make Offer.

      I believe every DomainMarket domain is priced ending in 88, and most for BuyDomains as well (or at least some other specific number). If so few of their sales actually end in specific numbers that tells me the BIN pricing isn’t achieving the intended goal of getting someone to pull the trigger right away.

      And just because the final price doesn’t tell you about the negotiation flow, it is still more relevant than the asking price. That’s the number that finally made them accept, right?

      If you ask $4,888 to be cute and they call in to negotiate because you killed the impulsiveness, and when you say $4,500 they suddenly like the price… which is the more important number? The one they didn’t like or the one they did? Price it at $5,000 to begin with and maybe you make a sale without all the back and forth.

      It is good to capture impulse buys, and highly specific numbers may not be the best way to do that. Plus let’s say you drop a $5,000 price to $4,888 to be cute, they’re going to want to negotiate it down to $4,500 and now you’re down $500 plus the value of your time (or in their case staff which they have to pay), when you might have just captured the impulse purchase right away with the nice, round number.

      Just thought it was interesting that the study I read seemed to jive with the data that their highly-specific numbers don’t actually lead to that many BIN sales.

  • By Frank Mueller - Reply

    thank you for information
    I will test it.

    cheers
    Frank

  • By daren - Reply

    thanks michael, very interesting post, but without knowing how much of the domains are listed with a round number 00 and how much are listed with 88, it’s hard to get a real idea percentage wise what works better.

    lets say for example, 100,000 domains are listed with 00 at the end, the percentage of sales would be 3.36% and 20,000 domains are listed with 88 at the end the percentage of sales would be 5.44%.

    regards,
    daren

    • By Michael Sumner - Reply

      As discussed before, I don’t believe any of DomainMarket prices any domains ending with 00 and BuyDomains has very, very few that end in 00 (so much so that they can be hard to find). Just go to their site and browse around, do a few searches, etc. and you’ll see plain as day that an extremely tiny fraction of domains are priced with 00.

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