Why do gas prices always end with a 9/10 designation? Do the oil companies think we’re all stupid? If they put the current gas price at $1.59 9/10c , do they think they can trick us into thinking , " wow , gas prices are less than $1.60 per gallon, and so we’ll buy their product , rather than the guy selling at $1.60 9/10c? Is it really cheaper , or just a clever marketing trick? Who came up with this insidious “9/10” c marketing scheme , and how long has it been around? The teeming millions are just dying to know!
That column asks why prices for almost everything in the USA end with .99 dollars or .95 dollars but doesn’t address why do gas prices end in .9 cents. AFAIK, Cecil has never spoken on this specific topic.
I think the simple answer is that all the stations do it and there’s no incentive to be the first one to stop doing it. When the competition says 2.799 and you say 2.80 a significant group of silly creatures will go to the competition just to save 1 cent on a 10-gallon fill-up. And if you drop your price to 2.79 you might not gain any customers but you’ll be losing 9 cents on every 10-gallon fill-up. Perhaps some clever publicity campaign could make it profitable. But there’s no clear incentive.
Wrong scale … 13.9¢ is better than 14¢ per gallon when a dime fed a family of four …
The answer is yes, a huge yes, a yes that has been tested repeatedly on all sorts of populations. Retailers of all sorts keep doing it because it works.
You may think this marketing trick doesn’t work on you. Maybe it doesn’t. But some other trick does. Dozens, maybe hundreds, of these tricks surround you. You’re bound to lose because the house always wins and you can’t get out of the game.
I never ‘fill-up’ because I don’t want the oil companies to think I like their pricing.
Well, that will show them!
Edited title to better indicate subject.
Colibri
General Questions Moderator
I doubt very much if they have any idea if you ‘fill up’ or just put some amount in unless you are using an attendant and you ask for a fill-up.
“Oil companies” don’t set retail gasoline prices, local gas station owners do.
I think a better question is why some people are so highly attuned to gas prices in the first place? 1/100th of a cent is meaningless but so are cents yet I know lots of (not poor at all) people that will drive a significant distance to save 50 cents on a fill-up. There is nothing wrong with being frugal in general but they don’t treat everything like that.
There is no way I am driving a mile or more out of my way to save less than a dollar. It isn’t worth my time or effort and probably doesn’t even work out that well economically because discount gas stations are usually pretty grim and take some effort to get to.
Someone that did that with everything would drive most people insane yet there are apps dedicated to helping people save literal cents on a fill up. Many of the same people wouldn’t even bother to bend down to pick up a dime, let alone pennies, because they don’t need to. It doesn’t make a lot of sense (no pun intended).
Apparently a legacy from when the price per gallon was low enough that a gas tax in fractions of a cent would be significant in the final price, and then combine that with maximized-profit marketing (37.9 < 38). The retailers figured, if we’re having to count fractionals, might as well use the highest fractional short of a whole cent (and the tenth of a cent, or mill, IS a valid unit of US money). Also, staying at 9/10, rather than rounding to the full cent, meant the meter would add up fractionals for the record in case of audit. Heck, even today the tax per gallon is set down to the mill rather than to the whole cent and though today’s systems could calculate exactly the totals, by now it has been institutionalized and selling gas at $2.785 instead of $2.789 would be leaving money on the table. But it is not mandatory nor absolutely universal and different stations or sales territories do stand at whatever is the actual fractional amount after taxes, or use their own computation – in PR for instance the standard practice is to retail per liter and price the fractional at 7/10 of a cent.
But we do it in Canada as well, where the mill has never been an official unit of currency, and we abolished the cent coin five years ago. I do, however, see stations advertising fuel prices in cents per litre that end in different tenths-of-a-cent: 111.4c/L, 106.3c/L, etc.
Except in this case, when every station does it, it is basically a meaningless decoration.
First of all, the difference can be quite significant (I use premium where the spread country-wide [even just for the 25th and 75th percentile stations] can be on the order of 40-50 cents. Even if it is less than that, ehh, so I get to listen to another song or two by one of my fave bands while feeling the cool breeze of my skin.
Second, we as consumers would be simply forcing stations to play things honest, which if we all did that they would indeed be forced to do. [This past week all of a sudden we had a county wide spike, and the large often 20 cent spreads between stations all vanished, to 2.39 for most of them. One station I had been going to recently saw a 20 cent rise. The one I was using last month only went up 6. Yes I am well aware of [del]Ed[/del] Cecil addressing my very question on such shenaningans last month. Still stinks.]
Consider spam emails for scams.
*Nobody *believes a Nigerian prince has a million dollars to share with you, right? And if they did need a favor, why email you. You might screw them. There are all kinds of credible law firms that can and will handle things like this.
Yet obviously enough people fall for the scam that it is profitable to send the emails and pay someone to type responses to the victim’s questions.
Even people who do reply to scams, out of them, probably the majority don’t fall for it and send any money. But again, it’s profitable, or those emails wouldn’t still be arriving today.
Similarly, even if almost no one falls for prices with 9s in them, if enough people do that it’s more than the tiny cost of setting a price that way, it makes sense to do it…
CostCo gas stations don’t. Their prices are set at a specific cents, with no 9/10¢ add-on. (And they are usually 10-20 cents less than the other gas stations. Today, $2.33/gallon, while the local stations are $2.499.)
The marketing trick is ending the price in a nine, and so is far more widely used than the tenths in a gas price.
When I say you can’t get out of the game, one trick I’m referring to is the trend on restaurant menus to give prices without cents at all. Appetizers for $8, entrees for $32. This is treated as a signifier that the restaurant is both upscale and good, somehow better than ones that charge $8.00 and $32.00.
If their prices are 10-20 cents less than other nearby stations, they don’t need to play the 9/10-cents game to attract customers!
But there’s also this: I always get gas of a certain well-known brand, whose prices are always, everywhere a few cents less than other nearby stations. I wish everybody (or nearly everybody) would always go to the cheapest nearby station, even if it’s only cheaper by a cent or two. If we consumers would all do this consistently, it would force stations into perpetual price wars, to the benefit of all consumers collectively.
And yet … When I see stations, even on opposite corners right across the street from one another, with prices differing anywhere from 5 cents to 15 or more cents, there are still always plenty of customers at the pricier station? Why? Why do they do that?
5 cents means that even if someone is filling up from empty, they’re probably spending less than a dollar extra at the more expensive station. So we’re not really talking about money, at least for most people. And it’s across the street, which means that roughly half of the people on the road would have to make left turns to get in and out. And maybe they have some kind of reward points that lower the price for them even if they do care about those pennies.
I’ve never seen a 15 cent difference except for the short time where station A changes daily pricing before station B. It’s rare to see more than a nickel on neighboring stations.
1> Easy in, easy out.
2> I like their milk pricing, coffee selection, affiliated fast food.
3> Expensive station kicks back to their charity scrip program a much higher percentage which more than makes up the difference. 10% is near a quarter per gallon these days.
4> I have their rewards discount card which negates the difference.
5> I carry their credit card.
6> My vehicle runs better on that brand.
7> They offer alcohol free gasoline.
8> My employer insists I go there with a company car.