Does 99-Cent Pricing Really Work?

May 23, 2016

9:00 pm

We all want to know what the best price is for our products. What can we charge that will make people want to buy it most? We work through this when we start out, and we optimize as we grow. Throughout the process, this same question always pops up: Does 99 cent pricing really work? Will ending our price with a 9 actually yield better results? Is there a threshold after which it doesn’t matter?

Odd vs. Even Pricing

The difference between odd and even pricing is exactly what you’d assume. $0.99 and $28.15 count as odd prices, while those like $100 and $45.50 count as even prices. Why was a difference ever made? Why wouldn’t prices only go up by even currency, in ones, fives, tens, twenties, and fifties?

The stories go back more than 130 years, mostly back to the invention of the cash register – yet, these are all rumors. My personal favorite, and the one I’d like to believe as true, is that a newspaper salesman convinced surrounding shop owners to use odd pricing. Newspapers cost a penny, so when the cashier would give customers change for their odd-priced merchandise, those customers would now have change with which to also purchase a paper. Talk about ingenuity!

The more noble explanation, per the Museum of American Heritage, is that charging 99 cents “allowed merchants to thwart pilfering clerks by charging a penny less than the fully dollar amount, thereby forcing cashiers to pen the register to give change to a customer.”

Today, cash and change mean so much less than they used to. The majority of consumers purchase online or with plastic, so that two things happen:

  1. People aren’t as attache to their dollars and cents. It’s all just numbers on the internet.
  2. Any change from a purchase isn’t used. It usually just sits in a bank account. On a good day, it’ll go in the charity bucket at a checkout.

So, why is odd pricing still so prevalent today?

But Does It Work?

As of 1997, about 97 percent of advertisements showed prices ending in ‘0’, ‘5’, or ‘9’, with the majority (60 percent) ending in ‘9’. Brands usually have a reason for their decisions. Does ’99’ actually sell better? You’d assume so, but let’s look at more of the research.

There’s something about the number 9. Not just when it’s 99 cents or 99 dollars, but prices ending in 9 tend to sell at much higher rates. Here’s two great studies.

In 1987, researchers at the University of Chicago compared retail prices of margarine. When they dropped the price from 89 cents to 71 cents (a 20 percent drop), sales increased 65 percent. When they dropped it from 71 cents to 69 cents, however, sales skyrocketed 222 percent! A price ending in 9 seems to encourage buyers to bite the bullet.

The most definitive study, or at least the current fan favorite, has been put together by William Poundstone in his book Priceless. he takes eight case studies of these “charm prices,” as they’re dubbed, and shows case after case that those prices ending in 9 boosted sales by an average of 24 percent, compared to rounded figures. That’s amazing! In other words, pricing your product at $99 will, on average, yield 24 percent more sales than if you priced it at $100.

Does 99 cent pricing really work? Absolutely. And it’s not just 99 cents. The second digit seems not to matter, as long as you end your price with 9. What will be interesting to see moving forward is if this seeming law of consumer behavior begins to change as cash (and even in-person) transactions continue to decrease. Whatever happens, 99 cent pricing works. For the time being, you’re definitely better off ending your product prices with 9.

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Kenneth is a writer, marketer, and creative type. Check out his website at kennethburkewriter.com !

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