People think an item is way cheaper when priced at $9.99 rather than $10.
Photo from Photoxpress
Price tags ending with .99 rule the stores. They are prevalent wherever you shift your view. Ever wonder why retailers do that? And you can expect certain category of products and services with price ending in 0, like $10 or $400. Even the emission of the comma in 1200 is a result of pricing studies.
9.99s
9 has a pricing power. Any item that ends with .99 speaks out “great value”, “sale” and “discount”. Buyers think that it’s the lowest price it could ever have.
People round $9.99 as $9 instead of $10. Researchers call this the left-digit effect. Everybody that has a brain is susceptible to think that way because that’s just how human minds work. And we are more led to round prices on the left digit because we see .99 innumerable times.
William Poundstone on his book Priceless analyzed eight different studies on .99 prices and found that sales increase by 24% on .99 prices compared to the 10s. Kenneth J. Wisniewski from the University of Chicago conducted another study at a local grocery chain: sales of margarine increased by 65% when price was dropped from 89 cents to 71 cents; but it increased by 222% when dropped to 69 cents!
People buy more when the price ends with 9. That’s why we see a lot of .99s.
10s
A tipped polo from Neiman Marcus is priced at $150, while a Dolce & Gabbana leopard print bag is priced at 3,425.00. Both prices are ending with 0, and both products are high end. An item whose price ends with 0 communicates premium quality.
People get satisfaction on owning an expensive product. People are convinced that prices ending with 0s are upscaled; and prestige brands love it that way. Companies wanted to keep the reputation on their products so not all can buy it and those who can buy it will love buying it.
1200s
How they write it affects how you buy it. The longer the price appears, the more expensive we perceive. This is the reason why restaurants minimize the price on their menu with 29 rather than $29.99.
Commas and cents make the price longer; hence, increasing the magnitude of the price (at least according to our brain). 1200 seemed to appear cheaper than 1,200.00. There are less words in “twelve hundred” than in “one thousand two hundred”, so we think of 1200 as less.
Did .99s lured you?
Sources:The Psychology Behind The Sweet Spots Of Pricing; Fast Company
Pricing Psychology: 7 Sneaky Retail Tricks; CBSNews
5 Psychological Studies on Pricing That You Absolutely MUST Read; Kiss Metrics
Party Like It’s 19.99: The Psychology of Pricing; Wise Bread
An Easy Way to Make Your Prices Seem Lower; Neuromarketing
Moment Matters 
I don’t buy it. I see anything over a .00 and I round up. I see a 4.39 and I round up to 5 dollars. I see a 4.02 and I round up to five dollars. .99 does NOT say sale to me. It says, ‘we are trying to trick you into thinking it is less than it really is. We are tricking you out of items when the add says anything 10$ and over and most everything is 9.99 and under. I distrust .99.
Despite the psychology of marketing(The Hidden Persuaders, Vance Packard, 1954) $10 or $50 makes me think it’s a close out sale and cheap. The .99’s never impressed me. I agree with urbannight.
Terrific! Manipulation is the name of the game. Almost bought a used Toyota Prius from a dealer priced at $9,999. Had the good sense to have it inspected by a Toyota dealer. Water pump was ready to go. Significant body work had been done, although the Car Fax showed no evidence of an accident. Multiple concerns. If it had been listed at $9,999.99 I probably wouldn’t have bothered -:) Sad but true.
It struck me as perfectly plausable that the probable cause may be because of the way that we’re wired of cause. We’ve been primed by evolutionary providence to ritual. Any repetitive sensory input is inherently percieved as notable, and the perception we’re left with is an irresitable attraction. It’s the same principle at play as the reason some people are more beatiful than others.
Thank the opportunity, and thank you for the opinion that resulted. That much said, I’m conscious bound to mention that the use of 9.99 should probably be banned from use as it triggers an instinctive response we can’t help but act on.
We have that over here … prices are 4.49SEK – and we don’t have any smaller change than 1.00 – so that means I have to pay 5.00SEK – we have the 9.99 but have to pay 10.00 anyhow. It’s proven that 0.99 sound cheaper and full 1.00. So retail is all built on that.
I try not to fall into the “trap” of the .99- bur alas I am not always successful! Thanks for a great post.
By the way- You have followed me in the past at my blog Mosaic, I am transitioning over to a WordPress.org site and wanted to give you a link so we can continue to stay connected! Nancy of Simply Abundant Life.
I always round up what ever I buy to the next dollar what ever the price is also. To me with paying sales tax and everything it ends up being closer than if I round it down. Most time time when I get to check out if I have a lot of stuff it evens out. I am with in a few dollars either way of what I have to pay.
I worked in retail for years and we use to laugh that we could put something out for $1 and sell none in a week but put it out for .99 and sell them all in a day or two. Drop a penny and sell out. I guess a lot of people do look at things the other way.
That was very informative! Thanks. 🙂
In Canada, they have phased out the penny (apparently too costly to produce) but retailers have not yet eliminated pricing ending in 2,3,4,6,7,8 or 9 – someone will be making money shortly as everyone rounds up… They calculate that charities will lose millions because of this “cutback”. Thanks for visiting.
I’m in Canada. I’ve heard this, but I don’t understand how that will work. When we add sales tax on a purchase, we won’t always have values that end in ‘5’. Are hey expecting stores to adjust their prices to make sure the till rings up a ‘5’?
Great post! I usually round up when I’m in the store but that doesn’t mean those numbers didn’t encourage me to put it in my cart in the first place.
Ill definitely have to keep this in mind when designing/printing my new pricing menu.
I totally believe the 0.99. I’ve actually been thinking about how to price my ebook, and when I decided on 2.99, I was like “That’s not bad – it’s just a little over 2 bucks!” Except it’s not! It’s basically 3 dollars! I’m even fooling myself! Damn those 0.99s!
I know about pricing as part of marketing strategy to enhance image or increase sales. I learned about the .99 and it lost it’s effect. The practice of dropping cents on menus is news to me though, and when I thought about it, it is SO TRUE for me. They got me good with that one. Great post.
Meaning, I’d noticed the absence of cents, but didn’t realize the effect it had on me until you pointed it out.
I do not associate 99 with a bargain , I do round up and know it is to the next pound. I find it silly those prices. We do have a £ shop at least the prices are always £ 1 instead of 99 pence, easier to pay!
“2 for” and “3 for” always crack me up too – i.e. 2 for $10 – thinking if you get two it’s a bargain – just buy one.
I’ve always heard this and as much as I know this fact I seem to be the one who falls for it everytime!!!
Sale is the word definitely attracts crowd.
I round 9.99 up to 10, and so forth. I find it easier.
For years I have read $9.99 as $10. When something says, “Only $999.99”, I say, “You mean, “Only $1000”? Yep, it fools lots of people – but not me!
I also don’t quite comprehend the number when someone says ‘twelve hundred’ – I have to picture it, then translate it to ‘one thousand two hundred’. 🙂 Interesting that people see products ending in 0 as higher quality. I didn’t know that.
ideflex – Here in Israel we haven’t had a penny for a long time. We used to have five-cent pieces, but then they put a two-shekel coin out and phased out the five-agorot coin. So now the lowest denomination is .10, which means you always round either up or down. It’s not so bad, though – sometimes you gain, and sometimes you lose. If it’s .7, you lose .3. But if it’s .4, or even .5 sometimes, you get to keep the change. I’ve never done research, but I think it evens out in the end.
What about Mr. JC Penny back in the early 1900s? When items were rung up in total dollars & people paid with bills it was easy for the cashier to just pocket the money.
(No printed receipts yet.)
So I share my business 101 class knowledge (from 3 decades ago) JC Penny made the prices end in .95 or. 99 because a penny & nickel was worth something & the employees were less able to steal. They had to open the register to get change. Yes the reason for the pricing has changed but let’s give credit to the guy who started it.