I read Cecil’s answer about why things cost .99 instead of a buck in the archives, but everytime I talk to someone, they tell me of this “study” that was done where people purchase more if it’s priced a penny under the dollar amount. I have never seen this study, only heard about it. Anyone know about it? Anyone agree with it? I find it hard to believe that the American people are that stupid, but I’ve been wrong before. To compound things, here in Oregon there is no sales tax, so rounding off makes a lot more sense (but less cents!) Plus, a penny isn’t worth anything anymore, so why would people still fall for this? Thanks for any help!
PS. This is my first post, so if there was a thread before about this, please direct me and disregard this an accept my apology for not being able to find it.
Yeah they are. And they will call Acme Car Repair more often than Zenith Car Repair, solely because it appears first in the yellow pages. I run yellow pages ads, and I get this comment from my customers often. Yes, my prices end in “9” for the same reason my business begins with “A”. It works.
Actually, .99 prices can be convenient for the seller.
I used to be a door to door salesman. If , for example, I sold 413 items in a week, with all prices ending in .99 the total should end in .87 If it didn’t then I knew I’d made a mistake in my calculations somewhere. Errors would have been harder to spot if it was reckoned in whole pounds.
If this practice were as widespread as it is because people are stupid, then someone would make their prices in even dollars and run an ad campaign touting the fact that they don’t think their customers are stupid. It would succeed, and be copied, and a certain percentage of stores would have rounded off prices. That hasn’t happened, to the best of my knowledge.
I have no cite, but what I recall from my marketing class is that it has nothing to do with people being too stupid to realize that $99.99 and $100.00 are effectively the same price. The idea is that psychologically $99.99 feels cheaper, even though you know better intellectually.
Thanks for the quick replies! I don’t agree that it works. I am asking for proof. I know that there are three or four businesses here in Oregon that have gone to the dollar amount instead of the .99 and they report no change whatsoever. Wait, that’s not exactly true. They told me when I asked that the only comment they heard was, “Well, you raised your prices!” People still came, bought and they are still doing great business. For proof, I would like to see a study cited, but have not. The only advantage I’ve seen is the person who said that it’s convenient for the seller, but it makes transactions less convenient for both buyer and seller. I also don’t think it’s because people are stupid, I think it’s because it was started in thelate 1800’s and it’s the way it’s been and no one is willing to change it out of misguided fear. Of course, I could be way off…
This always reminds me of a joke: an economist is walking down the street with his daughter, and she spots a dollar bill laying on the ground. “Daddy, can I have that dollar?” she asks her father. “I’m afraid not,” he replies “if it were real someone else would have already picked it up.”
I hate this insulting practice with a fiery passion. I always quote prices in round figures and I suggest you do the same. It can be fun sometimes in a store, to pretend the psycho babble is working in reverse. See $99.99 but keep lapsing into $101 instead of $100 or $99. And I always demand one cent changes.
I have seen a few stores try to break the trend but the pressure is too great. Between $99.99 and $100 it’s obvious where my money would go. Sorry, no cites but I had to add my 1.99 cents.
I should clarify, I don’t think people are dumb for either buying more when prices end in 9, or when the business comes first in the phone book. My “Yeah they are” was more of a snark to disagree with the OP than a belief of mine. People do what they do; as a business man, I just give them what they want.
On the one hand, when I’m shopping and I have only 2 or 3 items, I round each one up, add them together, and I know how much they will cost. But it gets very difficult with more items than that.
When I take the family to dinner at a restaurant, I try to mentally add each one’s dinner, but they end in .95 or .99, and when I get the check at the end I’m always surprised at how high it is. I try to compare my expectations with the reality, and it seems that the problem was looking at the integer portion of the price, and neglecting the decimal.
