Stores often price goods using 99 cents as the last two numbers. Ex: $1.99, 9.99, 7.99. The rationale is to make the price look lower to the customer. Does the strategy work? After all, anybody can easily round off a $9.99 item to $10.
A number of studies have demonstrated that customers tend to place more prominence on numbers to the left of the decimal rather than to the right. Perhaps we have become accustomed to pricing using 99 at the end. Most customers do not automatically round the price up. When stores print 99 as smaller numbers in the price, this adds to the likelihood of overlooking the numbers at the end.
Furthermore, when prices carry 99 in them, they tend to make customers think these are the lowest prices possible. However, when a store pushes its price up to $3.99 from $3.60; it doesn’t have the same effect. Customers notice the increase. On the other hand, going down to $3.59 could help sales. When pricing is very competitive, simply using the 9’s won’t help if you are priced high to begin with. This is especially true on the Internet. Gasoline pumps have used this tactic, pricing gasoline using 9 tenths of a cent.
My experience has demonstrated that businesses do better using prices that end in 9’s. Customers perceive this as a better value.
Retail stores have this down: but service providers often price in even dollar amounts. I have seen ads for furnace tune-ups at $30 instead of $29.99.
Some upper end sellers may want to hold to the full dollar pricing. For example, menu pricing at $7.99 for a sandwich may work in a hamburger place; but not in a high end restaurant.
King Solomon wrote, “Ears that hear and eyes that see--the LORD has made them both.” (Proverbs 20:12, NIV). We need to understand how customers see and perceive our prices and respond in a way to maximize our impact.
Steve Marr, Your Christian Business Coach
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