Stories | October 21, 2009

# The “99” price point. Why is it so common?

Many products are priced to end in "9". Why? You'll see it in the price for many products, cheap and expensive.

Detergent might sell at something like \$2.99 a bottle. Soap at 49 cents and cars at \$5,999. But what is so special about the number nine? There are several explanations.

Registering a change?
Some argue the advent of the cash register in 1879 played a part. By charging 99 cents, sales staff were forced to open the till to give back change - meaning there was less chance to steal from their employer by pocketing the money and not registering the sale.

Left hand digit bias
Various experiments, however, suggest when the tendency is to read a price from left to right, this is a factor. Reading this way means we tend to perceive a larger difference between 2.99 and 3.00 than the mere one cent difference. An alternative interpretation of this "left-hand digit" effect is that people can actually read 2.99 as 3.00 but think the producer is giving a little back. People thinking this way might consider that they have got a good deal.

Others suggest that producers are not so generous
Some argue .99 is a way of simplifying choices for shoppers. Instead of charging 75 or 85 cents or even \$1.20, the price is set at an average "99" level. Depending on how savvy the consumer is, retailers could get a price advantage.

Let's negotiate
Expensive items, such as cars, are also are often priced in 9s. A possible explanation is that sellers build in a margin that can be beaten down by the buyer. After all, the true price the sales person might expect to get for the car could be \$4,500 but there is no point in setting the price there as bargaining would begin at that price. Perhaps if the price is high but ending in a 9, it's worth haggling. The sales person might have room to move.

Ian Bright

Senior economist at ING
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If you have a question for Ian, ask him here.