Does anyone know why a business would price an item at $9.99 instead of $10.00?

Question

Does anyone know why a business would price an item at $9.99 instead of $10.00? Or even $14.99 instead of $15.00? I realize that there are obvious reasons for doing this but does anyone have actual textbook knowledge on this information? Maybe someone that took a marketing class and learned about psychological pricing? More importantly, why is that prices of items in HIGH-END stores mostly end in .00 and prices of of items in low-end stores in .99? Why won't Saks price a shoe at $399.99 instead of $400 and Zappos price a shoe at $100.00 instead of $99.95?

Answer 1

They are exploiting the human psychological weakness GREED.

(incidently, we ninja use this tactic quite often)

People are easily tricked when they don't critically examine things. Monty Hall would do this to people all the time on Lets Make A Deal. Basically, the act of pricing one cent below is both an appeal to the greed, and an insult to the intelligence (or lack thereof), of the average person. Pricing five cents below is perhaps even more obnoxious, as it implies, "I know you won't fall for the $9.99, but maybe you'll fall for the $9.95."

Gasoline pricing is even worse as they go to the hundredth decimal place in order to not breach the psychological barrier of spending "another penny." A can of beans selling for $2.99 is truly one cent less than $3.00. A gallon of gas that sells for $2.99 is actually $2.99 and 9/10 of a cent, which is $2.999. For all practical purposes, the gas is $3.00. If you bought 100 gallons, it would cost you $299.90, whereas a 100 cans of beans would be $299.00, almost a dollar less. When you're selling millions of gallons a day, those tenths of a penny add up to a lot of extra profit! Gasoline is the only product sold like this, because honestly, nobody pays attention.

High end pricing is not consistently rounded off, but in cases where it is, it's probably because the vendors are less inclined to try "hoodwinking" people who generally have more than enough money to afford their products. In other words, they don't need to trick them into buying, because their products are so sought after. Also, a lot of wealthy people are often (though not always) less concerned with price than prestige. Ever hear the expression, "if you have to ask, you can't afford it."?

Answer 2

As a general rule, most people who shop at the higher end stores aren't really worried about price. For that matter, a lot of people shopping in the high end stores are there for status boosting. Ego feeding if you will. They actually frequent these establishments so they can later boast how much they are spending on any given item. However not all of these shoppers are there for that but are there for quality instead. This particular group may be a little more concerned with price but are willing to forgo the higher prices to gain higher quality.

Now on the other hand, your lower end stores cater to the more frugal group who are looking for the deals. And then there are people who just cannot afford to shop at anywhere else. To these people the 99rule really kicks in because it looks less expensive. And yes it is a psychological ploy. You can take say a fishing lure and put a $3.00 price on it and sell quite a few. But you then take the same lure and list it for $3.99 and sell just as many because it just plain looks like a good deal because it's still under $4.00.

Some stores you go to may have items listed in a price that ends like $2.01 or $2.91. The ending number being 1 is the key here. This can be code for an item they are going to discontinue or simply discounting to move the item on out. Say like a slow mover or that item may possibly be a scratch and dent item.

Answer 3

That is a really good question!! On the first part, about why 9.99 instead of 10.00, that is so people like my mom will say that something 'only' cost $9, they round way down. On the other part, about high-end/low-end, I am really curious to see if you get an answer. I never really noticed it before, but you are absolutely right. I used to work at American Eagle, our priced were even-$40 or $39.50. Now I work at Kohl's and our prices are .99. Very interesting!

Answer 4

As I recall from history class, the .99 prices started with published newspapers. A shopkeeper (who also was associated with an early newspaper business) had his prices at .00 for everything. The newspaper was .01. No one was buying. So, he changed all the prices to .99 so instead of change, someone would just take a newspaper... to increase circulation.

I'm recalling this from memory... from a long time ago. Not even sure it's accurate, but sounded reasonable to me at the time.

Answer 5

When i work in retail,i ask the same question.They told me it looks
better in the customer eyes $9.99 Now stop and look at it,And look
at this $10.00 People say,hay it is only $9.99 But at $10.00 your
mind says No.It is that 1 penny that makes the whole differents.
I have one for you,My husband can spend $100.00 to gamble,but when
it comes to fill up the car with gas,he will go out of his way to save 2cents.Now that puzzle me,I did ask him,he cant tell me why either.
So,there you go.So we both are in the same Boat,!!!!!!!!!!!!

Answer 6

I don't know much about this, but I will say that it works. My father never sees the trickery in this. In fact, if it's labeled $199, he will actually say it's $100. Or if it's $19.99 he'll say it's $19. So I think is the reason. To make the product price look cheaper. I know this isn't a textbook marketing answer, sorry.

Answer 7

my friend who studies marketing says its taught in the book.
1) for human psychology, 14.99 looks more like 14 instead of 15.
2) you get a change back of 1 cent, which is better than 15 whereas u wont get any change back !!

Answer 8

Maybe the item could be priced at $14.29, but as long as it's under $15 sales volume stays higher.
So they mark it to the lowest number under $15, which would be $14.99, $0.70 additional profit on each item.

Answer 9

The thing I learned years ago is that people think that they are getting a bargain when prices are not even numbers. Also (don't know if its true) I heard that you don't get audited as much if things are not sold in even amounts.

Answer 10

It is very simple. Something at $14 plus change is perceived as lower than something that is $15. Nothing too sophisticated, but works off of human behavior.