Years ago, I wondered why everything in the store, on television, and in the magazines ended in “.95 or .99”. Someone told me at that time, that it was to keep cashiers honest and force him or her to open the registers to make change (rather than pocket the cash handed to them). I’m not sure how true that story is, but it works and nobody has come up with a better explanation.

Assuming the above is true, is that pricing strategy valid in an online environment? After all, there are no cashiers, no change to make, and no register to open. Do people perceive a higher value when an item is priced with an odd number (19.95) versus an even number (20.00)? From the available research… yes it is.

The reason for this way of thinking is still unclear, and the object of some debate. Perhaps it looks “awkward” or the shopper simply stops at the first digit reading the “9” as lower than “10” – thus a greater value for the same product. Some people will say that a greater difference is perceived the higher an item is priced. For instance, 99.95 is registered as “less than 100.00” more than 9.95 is registered as “less than 10.00”.

Some merchants have taken this information and intentionally used even numbered pricing to target “higher end” customers – pricing something 200.00 rather than 199.95. The perception in this case, coupled with targeted marketing, and company focus gives the merchandise a perceived higher value or sometimes quality.

Pricing can be tricky. Pricing is critical for any business’ success. Having a clear idea of your target shopper and setting your price to be competitive, attractive, and profitable are key to the success of any business.

Sources:

Principles of Marketing - Setting Price

Julian Franklin