Why do stores charge .99 cents?
February 23, 2005 9:15 AM   Subscribe

Why do stores often charge .99 cents? A loaf of bread selling for $1.99 as opposed to $2.00, for example. Is there psychological research showing that this makes the price seem cheaper somehow? If so, how significant is the effect?
posted by banished to Shopping (38 answers total)
 
At a glance, $1.99 looks cheaper than $2.00. People tend to think "Oh, it's only a buck."
posted by nitsuj at 9:24 AM on February 23, 2005


How about gaoline for $1.99 9/10. Whew. At least it's not $2.00.
posted by Arch Stanton at 9:25 AM on February 23, 2005


I've heard a tale that this kind of pricing is supposed to prevent theft by employees - instead of just pocketing the $2.00, the employee would be forced to open the till for change.
posted by philscience at 9:26 AM on February 23, 2005


From my years in specialty retail clothing, pricing just below the next whole dollar ($0.99, or even $0.95) had a significant effect on sales. It would easily increase sales on an item 20%. It has everything to do with the fact that it "feels" like it is not 2 bucks.

It is also used by many POS (Point Of Sale) systems to designate a sale item. Many systems can be set up to automatically treat anthing ending in .99 as sale, .95 as promo, .50 as By one get one free, etc.
posted by qwip at 9:30 AM on February 23, 2005


Related to this is pricing items with a strange cent value - like at a certain store, you might find a bunch of items priced with $x.42, and always 42 cents at the end. I've heard this indicates to employees which models are old and being phased out (say, in an audio/video shop) and that they should try to sell them before the others.

As far as $x.99, $x.98, I've always thought it psychological - you'll think of it as cheaper than it really is.
posted by splice at 9:30 AM on February 23, 2005


There is a ton of research on this, whole books on the subject. People do indeed buy many more things priced at 1.99 than they do at 2.00.
posted by mathowie at 9:31 AM on February 23, 2005


It's not so much "tend to think", nitsuj, as it is a subconscious process. (To me, "think" implies some act of cognition.)

Yes, this one penny difference does have a psychological effect, and yes it's significant, and no I don't have any info at hand to support these statements. I seem to recall learning about this in the Gestalt Theory portion of my psych degree, for what it's worth (which is very little).

When people think about it, it's obvious that $1.99 is no different than $2.00, but most of the time people don't actively process the prices. They glance at them and parse them on a subconscious level, and that one penny difference becomes a one dollar difference and that makes the shopper feel all warm and fuzzy inside. Bizarre, but true.

Just think: we could finally eliminate the penny from circulation if McDonald's would just charge 80 cents for its burgers...
posted by jdroth at 9:34 AM on February 23, 2005


It's like not having clocks in a casino - just a mind trick.
posted by Dean Keaton at 9:35 AM on February 23, 2005


One explanation I've heard was that in the days of penny newspapers, it was a strategy the publishers pushed for in order to get more pennies into circulation. They used the nitsuj's argument to convince shopkeepers to attract impulse buyers. More here.

Also, I'd like to point out that the reason the price seems cheaper somehow is that it is cheaper somehow.
posted by Jeff Howard at 9:36 AM on February 23, 2005


The Straight Dope has the answer that I'd always heard, but they seem to think it may be apocryphal, or no longer relevant at the least. I had also heard it was to keep clerks from being able to fudge the money coming in and skim off the top while still being able to give correct change. More discussion here and people discuss their preferences here at 37signals.
posted by jessamyn at 9:37 AM on February 23, 2005


Douglas Adams refered to this in his book The Meaning of Liff:
KIBBLESWORTH (n.)
The footling amount of money by which the price of a given article in a shop is less than a sensible number, in a vain hope that at least one idiot will think it cheap. For instance, the kibblesworth on a pair of shoes priced at £19.99 is 1p.
posted by bondcliff at 9:40 AM on February 23, 2005


I have also heard the opposite -- when you sell something high dollar, ending the price in .99 makes it seem cheap. That's why things like computers and cars always have whole dollar value prices.
posted by sugarfish at 9:43 AM on February 23, 2005


Well, sugarfish, I think the kibblesworth (thanks, bondcliff!) is still there, but it's masked by the greater order of magnitude in the price.

For example, the kibblesworth on an iPod is a buck. Why does Apple charge $249 for the iPod mini? Because it seems more like $240 than $250. It's the same principle, but on a larger scale. Why does Ford want $14999 for that new Focus instead of $15000? Because they're playing tricks with your mind.

They don't bother with the 99 cents because they're not significant at those price points, but the same principle applies.
posted by jdroth at 9:49 AM on February 23, 2005


It's a theory called "psychological pricing" where certain numbers are supposed to be more appealing. There's a Google Answers thread about it but the reasons behind the use of those particular numbers are inconclusive. Could be theft prevention. Could be just the appeal of getting change, any change, back. When you see those non-round numbers, you mentally round up to the next flat number, and the fact that you're rounding UP makes you think you're spending less - it's all that extra mental effort.

Related: They have ways of making you spend!
posted by Lush at 9:55 AM on February 23, 2005


I have know two people who would look at something marked $9.99 and say, "Hey, it's only nine dollars!"

Neither of them were any too bright nor good with money, but that's neither here nor there.
posted by orange swan at 10:00 AM on February 23, 2005


I went to a bar last night and they were selling taps for $2.95, so the waitress had to give out nickels to everyone as change. I guess it worked in her favor because she got an extra small tip by everyone that waived off the change. The price was extremely strange since their other specials were in increments of 50 cents and whole dollars.
posted by Arch Stanton at 10:00 AM on February 23, 2005


It definitely works.

Actually, at my job, we use this kind of trick all the time. I edit news video, and lots of times producers won't want a piece that's too long, so they can fit more stories into the show. If you can carve it down to, say, 1:58, the piece is much more likely to fly than if it were 2:01 -- that two-minute psychological barrier is firm.
posted by Vidiot at 10:02 AM on February 23, 2005


it's obvious that $1.99 is no different than $2.00

Exaggeration comes easily, especially in a conversation about kibblesworth, but it's important to remember that there is a difference between $1.99 and $2.00. Roughly one-half of one percent, in fact.
posted by Plutor at 10:09 AM on February 23, 2005


I've heard this indicates to employees which models are old and being phased out (say, in an audio/video shop) and that they should try to sell them before the others.

It used to be the case at Sears, and probably still is, that all discontinued and clearance merchandise has a price ending in .x7 (e.g. .97 or .47). Prices of regular merchandise ended in .x9.
posted by kindall at 10:18 AM on February 23, 2005


Yes, yes, Plutor. Originally I had written "little different", but then opted for the less-precise more hyperbolic statement. Seriously. Aren't I a rascal? :)
posted by jdroth at 10:19 AM on February 23, 2005


Darn, I must be different from a whole lot of other people then. When I see 199 bucks, I am already mentally rounding it up while evaluating. So I'll think, "OK, 200 bucks. I wish those idiots wouldn't keep putting those ridiculous .99 prices on things."

Am I the only one?
posted by madman at 10:23 AM on February 23, 2005


Not quite the same thing, but some places that deal almost exclusively in cash will charge a seemingly random amount for items so that when sales tax is added, the total adds up to a multiple of $0.25-- this way quarters are the only coins required to make change.
also, ".99 cents" ? "$.99"
posted by obloquy at 10:34 AM on February 23, 2005


I promise you that I am quite bright - well, maybe not by MeFi standards - but this absolutely works with me. Quite often, if I'm thinking about something I want to buy, priced at £49.99, I picture myself spending forty quid, not fifty. Yes, a moment's rational thought will tell me that fifty is nearer the mark, but then buying stuff you want isn't always about rational thought. Awful, ain't it?

I am also very very bad with money, and have a tendency to buy things to 'cheer myself up.' So maybe there's a target demographic - the extremely irresponsible and irrational - and I'm part of it.
posted by calico at 11:35 AM on February 23, 2005


Car City Classics, a record shop in Michigan, used to price the records so when state tax was added, it came out even.
posted by user92371 at 12:57 PM on February 23, 2005


No, madman, you're not the only one. I even got my wife to round it up, and she's relatively new to the dollars & cents world, being used to renminbi. It's something you have to train yourself to do, I think.

We don't usually bother with the 0.1 cent on gasoline prices. When every retailer reduces their prices by the same tiny amount, it has no bearing on price comparisons.
posted by Kirth Gerson at 1:03 PM on February 23, 2005


Plutor: it's important to remember that there is a difference between $1.99 and $2.00. Roughly one-half of one percent, in fact.

Roughly?

Also, the difference is not a difference if it's not significant compared to the overall magnitude or standard of living (a singular penny is insignificant to almost all Americans.).
posted by Gyan at 1:10 PM on February 23, 2005


One side benefit is if you are adding items manually, as long as there are less than 100 items, you can check if you have them all accounted for by subtracting the cents field from 100.

So, say you have 13 items, your cents field MUST be 0.86 or else you've missed an item / added one too many times.
posted by shepd at 1:18 PM on February 23, 2005


Oooo, one other thing it does as a benefit to the retailer: It makes it *tough* for the buyer to work out the total if they're buying more products.

There's a good chance they'll mess up and buy more than they expected. Once at the till a lot of customers will be too embarassed to put back what they didn't want and will just be suckered into buy it anyways.
posted by shepd at 1:20 PM on February 23, 2005


Car City Classics, a record shop in Michigan, used to price the records so when state tax was added, it came out even.

Encore Recordings in Ann Arbor does this too. Less work for everybody involved.
posted by sluggo at 2:02 PM on February 23, 2005


Along the same vein as psychological pricing, it also allows retailers to make ridiculous claims during sales like "...for under $200!" when the price is $199.
posted by junesix at 3:02 PM on February 23, 2005


I always round up (and get a little annoyed that I have to). If I mention the item to someone else I always give them the rounded-up price.

Quality paperback books started being priced in even dollar amounts within the last couple of years.
posted by kirkaracha at 4:02 PM on February 23, 2005


When I see 199 bucks, I am already mentally rounding it up while evaluating. So I'll think, "OK, 200 bucks. I wish those idiots wouldn't keep putting those ridiculous .99 prices on things." Am I the only one?

Nope, I do it too. But it's not the case that the trick only works on dumbasses; I know smart, sophisticated people who respond in the way calico describes. It's apparently a common mental glitch that advertisers happily take advantage of.
posted by languagehat at 5:24 PM on February 23, 2005


I've heard this indicates to employees which models are old and being phased out (say, in an audio/video shop) and that they should try to sell them before the others.

When I sold on commission, the end numbers (.95 .97 .99) told us at what rate of commission they would pay us at. The prices would change daily as they wanted us to push something they had more of in inventory.
posted by Steve_at_Linnwood at 7:18 PM on February 23, 2005


On a related matter, I've noticed a trend in high-value radio and television adverts (cars, etc.) to say, for example, 'five-nine-nine-five' for £5995, eliminating those 'thousands' and 'hundreds' that communicate a large amount. Not to mention 'pounds'.

And in reverse psychology, Marks & Spencer price their non-food items in exact-pounds or 50p amounts, implicitly building their brand image by suggesting that they're too classy to engage in that kind of Top Shop 99p nonsense.
posted by riviera at 10:33 PM on February 23, 2005


Not quite off-topic: The classic 3 for a dollar! is said to sell more than 33 cents each.

I always round up unless I'm trying to justify a purchase to the SO :-/
posted by Goofyy at 12:26 AM on February 24, 2005


Similar thing?

Years ago in the UK, before currency decimalisation, some prices (of mostly expensive goods) were given in guineas.

1 guinea was GBP1 and 1shilling (GBP1.05). Seeing (say) a TV priced at 50 guineas disguised the fact that it actually cost GBP50 + 50 shillings (50 shillings = GBP2.50).

But I remember guinea prices making things seem more classy. They certainly were more expensive than you at first thought!

Guinea pigs were so called because they cost a guinea.
(Ok....I made that last bit up!)
posted by JtJ at 2:35 AM on February 24, 2005


Yes, guineas were generally used to distinguish payments for 'upscale' services: suits, legal fees... and horses, of course. (It was a real coin once.) Though there was also the equivalent of the 99p thing before decimalisation: you'd have something priced at 19/11½ ('nineteen, elevenpence ha'penny') rather than a pound.
posted by riviera at 2:57 AM on February 24, 2005


I've heard a tale that this kind of pricing is supposed to prevent theft by employees - instead of just pocketing the $2.00, the employee would be forced to open the till for change.

That only really applies to groceries, though, doesn't it? If it's non-food, it's a difference between $1.05 and $1.06 (in Michigan) really.
posted by dagnyscott at 9:30 AM on February 24, 2005


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