Everyday Math

Math and the Consumer’s Money

How do some businesses price their products to sell?

Did you ever wonder why some businesses price their products with a 99-cent cost at the end of the price? In this case, it appears that how we view numbers in association with money—or interpret our change—can affect the way we buy, especially when it comes to our impulse purchases. According to researchers, consumers are actually more likely to buy a product with the “.99” included in the cost.

To see what numbers most affected the consumer, researchers set up three catalogues, one with traditional prices, one with prices ending in .00, and one with prices ending in .99. They found that the 99-cent catalogues did much better than the .00 one, or the traditional catalogue, even though it only meant a one-penny difference. They believe the reason for reaching for the 99 cent article versus the $1.00 one is the 99-cent ending makes the consumer feel the price is less.

The researchers called the perception of 99-cents the “left and right digit effects.” The study showed that the biggest impact in pricing items at 99 cents comes when it changes the left-most digit in the price; for example, $29.99 instead of $30.00 would be thought of as a “better value” than $2.49 versus $2.50. Other research found that 99-cent pricing in the opposite directions also had an affect on the consumer. For example, with the prices $29.99 versus $29, one out of four consumers would not even notice the .99 after the $29.99—or the right hand digits are ignored, yielding one penny short of an extra dollar for the business.

To further prove that money perceptions of consumers are often skewed, in one college experiment students who compared the prices of $99.99 with $150.00, then compared the prices of $100.00 with $150.00 concluded that the gap between the $99.99 and $150.00 to be significantly larger—even though there was only a cent difference between the two.

What is the lesson? Pay attention to what you’re really paying for, and don’t ignore the 99 cents at the end.


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