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content:psychology:general:99_discounts

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.99 price discounting

Retailers have known for decades that they can sell more items if they set a price ending in .99. So, for example selling at €3.99 rather than at €4

Anecdotal evidence relates that pricing at n.99 can often sell more goods than pricing even lower - say n.84.

Aside from anecdotal evidence (retailers know it works) there have been a number of academic research projects which have confirmed the results. (example study)

It's unclear however, exactly why the 99 price has such a powerful effect - given that the consumers can easily see that the 'discount' they're getting is very minimal (often just a fraction of 1%).

There are various theories.

One is that consumers (in a hurry) give undue preference to the importance the number they read first - say the '3' in €3.99 as opposed to the '4' in €4.00.

A second is that consumers assume (probably correctly) that the item must have been discounted, and therefore it's perceived as more of a 'bargain'.

Another suggests that there is a 'hedonic' component, that's to say that consumers find it pleasurable to know they are getting a discount.

Further reading :Promotional benefits of 99-ending prices: The moderating role of intuitive and analytical decision style Working Paper 11-38, Business Economic Series 09, Carlos III University, Madrid.

and

Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments Quantitative Marketing and Economics; Mar 2003; 1, 1; ABI/INFORM Global, pg. 93

Notes :

[1] A 2021 study found that the strength of the effect might depend on the level of 'numeracy' of the customers. See In the Eye of the Beholder: The Interplay of Numeracy and Fluency in Consumer Response to 99-Ending Prices Journal of Consumer Research, Volume 48, Issue 6,

[2] One anecdote suggests that the practice was encouraged during the till (cash register) era in retail stores. The n.99 price forced the shop assistants to open the 'till' in order to give the customer their .01 in change. The opening of the till - with its associated bell-ring - could alert the shop owner that a sale had been made. Thereby making it more difficult for the shop assistants to simply pocket the cash they'd just been given.

[3] The same strategy is also used in countries which don't have a decimal currency system. For example, in the UK pre-1971 an item might have been priced at £4,19s,11d instead of £5 (a saving of about 0.089%).


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