It might seem like an inane question, but it’s been bugging me for years. It seems TV salesmen are very desperate to get rid of their product, often throwing in tons of free stuff, but it’s always “Only $19.95!” Is there something special about that price?
Many, many more people are going to buy a product priced at $19.95 than $20, simply because $19.95 SOUNDS like a much lower price. Furthermore, if the product is “under $20,” people don’t consider it a serious investment of cash and will be more likely to buy it on impulse.
I once heard an alternate theory that by dropping the price just below the dollar line, the vendor saves the customer a little bit of sales tax. Don’t know if there is any truth to this.
** Most **,if not all, retail products are priced at .95 or .99 for the reasons stated by ** Alereon **.
I don’t know if this is a hijack or the OP’s original thought,but why are they ** 19 ** .95.Why not 17 or 15 or even cheaper?A lot of these products seem to have a disparity in actual retail pricing,eg, cleaners are generally in the $3-$5 neighborhood in the market,while brooms mops,or pots/pans are usually closer to the $10 and up price range.
Well, dropping it 5 cents would save me 4 tenths of a cent in sales tax (5c * 8.25%). Gee, thanks vendor.
On the sitcom Married … With Children, the character Al Bundy, annoyed by pennies, shared his “ingenious” idea of a 99-cent coin, to be used for items costing $1.99, $19.99, etc. Neighbor Steve pointed out that Al had forgotten to take tax into account.
I think that when the price is uner $20 the seller is giving the buyer more of a reason to buy. I think that most stuff sold on TV this way is crap, and a price of $20 makes it more likely that a consumer may take a flyer on something that they normally wouldn’t.
The idea that “I really need that electric pineapple shaver” may win out over the idea that “it is crap and can’t possibly work” if the price is low enough.
It was actually the other way around, it was Steve’s idea for the coin and Al shot it down by pointing out the tax.
It’s a marketing technique.
Usually, if something costs 19.95 then you’ll probably end up paying 25 bucks for it (5.05 of Shipping and Handling).
Basically, they’re saying "All this for less than $20*!!
*plus S+H and applicable taxes.
19.95 (or 19.99) sounds more appealing than 20 bucks even though we know it’s the same thing.
Another technique is “All this for 3 easy installments of ONLY $19.95” At the end of the road, it’ll end up costing you about 75 bucks. But would you be interested in buying something if you had to dish out $75 bucks?
By the way, it not only applies to “19.95”.
9995$ for a KIA sounds better than 10,000$
79.95 is more attractive than 80$
199.95 beats 200.
Oh, and tests have shown that 49.95 beats 45$ every time (yes, I know!)
WalMart took it a step further by having their prices finish in a 7 (ie: 19.97)
Pretty smart guy, that Mr. Walmart.
A couple theories:
a) Psychologically, $20 is not considered “big money” by most people. This is because the $20 bill is the largest denomination carried by people on a daily basis. $20 is just one $20 bill, and is thus considered “not a lot of money.” When you try to sell something for $40 or $60, however, you’re talking about multiple $20 bills, which is a lot of money.
b) A lot of stuff sold via TV and magazines is junk, and it goes without saying that people are often disappointed in what they get. $20 is a threshold wherein it is low enough that most people will not bother to return the merchandise, yet high enough for the vendor to be able to make a healthy profit.
I wasn’t really asking why it’s __.95, but why they seem to choose $19.95. The whole $20 bill psychology thing seems plausible.
Why not $14.95 or $17.95 instead of $19.95?
Legroom. 
Seriously, it allows the seller to discount prices if they choose. Or, more accurately, to give the appearance of getting a bigger deal.
Ever notice when some of these products come out at $19.95, only to watch the price change to $19.95 for two!! One thinks they are getting a deal to buy two when the price originally bought one. Most times, the reality is the price point for the seller to make a profit is $9.95. By originally selling it at twice that amount, they initially increase their profit margins. “Reducing” the price (twofers) gives the appearce of savings. The seller can “afford” the price drop because the originally price was inflated at the start.
In addition, there is also the psychological factor that some prices may appear to consumers to be too low in order to be a quality product. Yeah, yeah, it sounds strange. However, an item priced too low can scare off customers – or more accurately potentially repeat customers – just as much as too high a price point.
I think that’s K-Mart. I’ve seen the 7s many times there. Only been to Wal-Mart twice, and seem to remember sixes and fours there.
But it’s still two for $19.95. not “one for $9.97.” $19.95 is still the magic number.
That seems plausible. In addition, I think people feel that anything below $10 is not worth having to charge on credit card and have shipped, because the “plus shipping and handling” portion becomes large relative to the base price.
By the way, when I was in the UK (>15 yrs ago) a lot of the prices ended in “99 and 1/2 pence”. In Japan, prices tend to end in 480 or 980, so 1980 yen is a very common price.
Don’t forget the ever popular 4/$1.00. Making you buy 4 when you only want 1. I hate to admit but this works on me.
One thing Fannie Mae makes it a habbit of selling things like 1 pound for $5.00. But their 1/2 pound box is $2.39. Or their 1/4 pound box $1.19 effectively making it easier to buy 4 of the 1/4 pounds cheaper.
Many years ago, I worked for NCR (formerly National Cash Register). I read in the company history that NCR salesmen suggested that merchandise be priced at slightly less than a round dollar figure. The reason was to prevent employee embezlement, to whit, the cashier was forced to open the cash register to make change and in the process the sale was recorded by the register.
[Dr. Nick Rivera] But I can’t make it lower than $29.95![/Dr. Nick]
The $19.95 is just the first item on the final tab. Add on the surcharges and the $20 item jumps to something like $26 or $27.95.
Even a $9.95 article rings up the surcharges.
A well know retailer introduces their new tool items on TV at $19.95 + the shipping crap, and local taxes since they are nationwide. You can stop at the store when at the mall and get it without paying the shipping charges.