People spend more when prices end in .99 (2018) | Hacker News Reader

People spend more when prices end in .99 (2018)

kenthendricks.com

170 pointsalihm203 comments

I never like thinking of pricing in this way. When you price something as $9.99, you're signaling to your customer that you're trying to manipulate them. Whereas a flat $10 is honest.

Integrity means a lot. The software I sell is priced in whole numbers.

However, the magnitude of effect claimed in the article is huge. It's the difference between selling at cost and a huge margin. Between doing well and shutting down your business.

Given the replication crisis is worst in these types of studies - the kinds of studies that beg to be the subject of TED talks - you have to wonder how reproducible these effects are.

Are we selling our integrity for bad science?

https://en.wikipedia.org/wiki/Replication_crisis

Retailers don't do this because of published studies. They do it because they've tested it internally for the last 40 years.

That may be true but we don't know that it is true.

When I started my selling software, I priced with something.99 too. I did this because everyone else did. I was unfamiliar with these sorts of things so I followed on.

I am sure that in some business at some point, there was a big positive in switching to that sort of pricing.

When I switched my software to whole numbers, I did not notice a drop in sales. Things continued to grow. Of course, my business is one data point and a small one.

How much of why we tend to do this is because, historically or normally, that is how we've seen it done?

Because you are selling software and your target audience are either business, enterprise or computer engineers.

The trial of whole number pricing keeps coming up in Consumer and Retail every 10- 15 years and EVERY time the test shows .99 works. Despite how most of us and even my younger self hated it.

Indeed, marketers aren't stupid (but it turns out people in general are stupid, enough to fall for this trick and many others).

That’s pretty ingenious to call people dumb. This is psychology and these tricks work on you even if you trivially understand that 3.99 is not feasibly cheaper than 4.00 — your brain simply processes information non-stop in the background and you are affected by this. Hell, there was even a study that people who claim they don’t fall for these kind of marketings tricks are more susceptible to fall for this, so, take what you want from it.

Also, even knowingly false propaganda has an effect on you.

Ingenious? Or disingenuous? Regardless, I agree with you, "tricks" and "dumb" was not said derogatorily, I meant basically what you said, that humans are biologically "dumb" in terms of falling for these "tricks," similarly to how optical illusions work. It seems you summarized my point better than I could.

When it is so well known, at some point it isn’t a “trick” anymore, right?

It isn’t as if retailers can fight reality.

Or that they can “come clean” by putting fine print under prices explaining why they are ending prices in 9. Which would create a major distraction messing with any sale.

It is just real-world reliable wackiness that both sellers and purchasers should be aware of.

There is no purely objective way to relate to selling and purchasing prices. Short of very simple scenarios where a spreadsheet actually captured all the real criteria.

Many products make people happier if the price is higher. Is that happiness bump a fraud, or the point?

Just remember to ask for $199,999.99 salary in your next interview!

> Or that they can “come clean” by putting fine print under prices explaining why they are ending prices in 9. Which would create a major distraction messing with any sale.

Why would they do that? That might lessen their sales if people knew of the effect, as a nocebo.

I agree(d).

> Which would create a major distraction messing with any sale.

As you consider the issue this phrase I think is the best synopsis of your thoughts: When it is so well known, at some point it isn’t a “trick” anymore, right

And yet we fall for the same tricks again and again. The most politically pressing? The number of people - internationally - who believe in a strongman leader.

MLMs also occur to me. We know MLMs so well that we've literally written laws against them. There are movies, articles, conversations. And yet, every single year, tons of people fall for them.

What other very well-known tricks do people fall for HN?

FOMO (invite only), trial periods, and decoy pricing are a few tricks I've fallen for in the past. I try to be vigilant, but sometimes it's just too much.

The .99 thing is like the placebo effect.

Both work despite people knowing they exist.

The final answer here gives clear indication of psychological bias toward left digits:

https://skeptics.stackexchange.com/questions/2359/the-origin...

what sort of software were you selling? Was it an app that is priced under 10 bucks? That would be very different from some enterprise software costing $500.

> That may be true but we don't know that it is true

I think a walk through a shopping mall might provide some clear evidence.

It'll provide evidence that they've studied it internally?

I don't think so.

Because only software engineers developed the ability of higher-thought, every other field is just a bunch of monkeys/NPCs living life.

I usually evade products with such tricks.

> I don't think so.

OK.

They were being polite because you were flat out wrong: a walk through a shopping centre gives you absolutely zero information about whether prices chosen have been tested or were picked by throwing darts at a calculator. It just tells you what prices those shops have chosen to sell things for, nothing at all about the reasoning behind those prices.

And the OK response is similarly being nice because if one thinks that the retailers for the past 100 years haven't extensively tested pricing, both in the real world and via simulations, they are naive to a large degree as to how businesses work.

I didn't say that's what I thought, though.

Perhaps not but that's what indymike seems to be implying, anyway.

In fact it seems really bad logic to assume that they would all arrive on the same price, had they actually done any real study.

There would be some outliers or weird niche customer populations.

Logic doesn’t explain human actions. And never will.

That's a non sequitor, as I'm not trying to explain human actions at all in this case.

I think their comment is pointless, and would agree with you calling it a non-sequitur, however I feel the need to pedantically point out that when you wrote "... it seems really bad logic to assume that...", that is explaining a human action (assuming).

You literally do.

And many physicians still recommend putting ice on sprained ankles 5x per day to reduce the “harmful” swelling. Even though the abundance of research now shows icing delays the infiltration of proteins, hormones, and cells that aid in healing processes (and can even cause further tissue damage).

Practices like this stick around because of the desire to be seen making proactive recommendations with putative benefit.

With the dresses there is clearly something odd happening. In all cases except one the cheapest dresses sold the fewest items even compared to ones that were $10 more expensive.

The human body (through evolution) only cares about long term effects for the human species.

The actual human might care about pain. Therefore, I don't think that the advice is necessarily bad.

Evolution isn't always our friend. There are many examples where our bodies work against us, only to help us evolve better as a species.

> Even though the abundance of research now shows icing delays the infiltration of proteins, hormones, and cells that aid in healing processes (and can even cause further tissue damage).

Do you mind sharing any references

https://drmirkin.com/fitness/why-ice-delays-recovery.html

When I was looking for evidence about the efficacy of ice to speed recovery, I found it very challenging. I would be grateful if you could share some of the abundance.

>Practices like this stick around because of the desire to be seen making proactive recommendations with putative benefit

One manifestation of this phenomenon in it's extreme form is cancer diagnosis and treatments. Barring a few exceptions, most cancer treatments are useless.

A lot of cancers can be cured.

Yes, it does appears so to the extent I have explored.

What a thoroughly uninformed and idiotic take. The narcissism of this field is astonishing.

Thank you for calling me uninformed and idiotic.

Reminds me of people who tried selling sturdy repairable phones with longer battery life. Even when people complained about battery issues etc. They kept buying the thinnest flagship. Mass markets are mass market.

> Reminds me of people who tried selling sturdy repairable phones with longer battery life.

My brother buys these. They survive up to a year in his "care", rather than the usual 3-4 months of flimsier phones. They all end up with cracked screens within months though.

Almost no mainstream consumer electronics nowadays are meant for people who lead active lives (outside of planned and streamlined activities like going to the gym or running) - because the people as a whole generally don't live active lives. If you happen to be an outlier, making your phone survive becomes a serious logistical issue. Sadly carrying one is a necessity in this day and age.

Another example: Many offroad vehicles/trucks nowadays won't survive days of the advertised use-cases without serious damage and are often utterly unsuited for it (the cybertruck isn't an outlier here). These things are being sold to people who like to play pretend. Manufacturers cross their fingers and hope you don't actually.

Notable exceptions to the rule are things like satellite communicators and some dedicated GPS map devices. They seem to have no issue surviving many phones with their own screens and functionality intact. Their manufacturers know you wouldn't buy them if you didn't plan to use them in the advertised conditions.

Indeed, regarding watercraft have seen it as “you don’t sell the boat you sell the dream”

Get your brother a glass screen protector for his phone. I haven't cracked a phone screen in a decade yet I've gone through many cracked screen protectors.

They're just going to crack right along with the screen. The form factor of modern phones combined with the fact that they're made from materials that will break rather than survive some deformation is a death sentence. These things being in the wrong pocket as you carry something heavy, or merely you sitting on them, will immediately crack their screens and hard plastic in half. The devices are just too big and flat. Any attempt at creating rugged variants usually consists of surrounding those fragile off-the-shelf consumer parts with copious amounts of padding. Now it's even bigger and the added weight is not going to help with surviving drops.

Look at the form factor of something like the Garmin eTrex[1] series and it should be immediately apparent why these devices can outlive about a dozen phones. Sit on it, throw it on the ground, put it in a backpack and throw it down a cliff, they'll be fine. Maybe dented and scratched, but they'll still help you find your way. They're small devices that are very round-ish in every dimension, and they're also pretty light, meaning there's very little energy that needs to be dissipated when they impact something.

Adding padding and protection only helps up to a point. To make smartphones actually durable, you'd need to take away from them. That means little or no glass at all. Use light materials that functionally survive deformation and point contact impacts. Also preferably it would run on AA batteries.

[1] https://bikepacking.com/wp-content/uploads/2021/06/garmin-et...

Phones, besides the functionality, are fashion accessories and bragging chips, and sometimes chiefly so.

I think it was Vertu who first recognized the potential back in early 2000s, The Matrix (1999) made a visual point of it, and since 2007, Apple has been building their entire strategy based on that, with enormous success.

People who need sturdy phones do exist, are few, and they don't brandish them, because these phones are well-beaten.

The people that complained may not have been te ones buying the flagships. At least, I wasn’t.

Although normie friends have commented on why I bought a OnePlus3 instead of something normal like a Samsung.

I thought it's notorious that sometimes they also don't know what they're doing, being carried by trends and vibes. "Half the money I spend on advertising is wasted; the trouble is I don’t know which half"

The "trend" was started in 1920. In the HN typical bourgeois stance, people here are of course immune to cheap tricks like .99 price ; and will reject it as "non-science", a very unscientific way to reject something on the basis of who makes the science.

The advertiser who knows half his spend is wasted is the one who /does/ know what he's doing.

Yes, that's the point of the quote, but the point of the poster you're replying to is that wasting half your budget would be considered gross incompetence in any other department.

"Half the lines of code I write are useless, I just don't know which half." - an incompetent coder

"Half the time I spend on the phone is wasted, I just don't know which half" - an incompetent salesperson

"Half of my menu is inedible, I just don't know which half" - an incompetent restauranteur

I don't know, you see plenty of people stating they only do X hours of real work in a given day. That sounds an awful lot like the same basic idea.

If I think about it too, half the lines of code being wasted is probably a relatively reasonable measure for writing code. Not because they're actually literally useless, but because you write a lot of scaffolding, a lot of first passes and a lot of code that will be a dead end or superseded before you're done. If you knew before you started exactly what lines of code you'd need to write, you'd be much more efficient, but we don't, so we write a lot of "waste" code too.

> "Half the lines of code I write are useless, I just don't know which half." - an incompetent coder

Legacy code in a nutshell. On some blue moon you get a chance to do a clean refsctor, but otherwise business doesn't care if 90% of the code is useless.

Even as the refactorer, you know that refactoring can be anywhere from throwing away simple unused code, to removing a seeming unneeded line and causing a forest fire. I imagine that's the equivalent with advertising (i.e I agree with you).

> the point of the poster you're replying to is that wasting half your budget would be considered gross incompetence in any other department.

Not if there too a spend of X was required to get the value of X/2.

Sure but should we believe that internal studies at retail chains are quality scientific studies?

Well, it is tested internally for at least 100 years: https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a

Yup. It's been settled lore, for retailers, as long as I can remember. I don't think they care about metrics.

That doesn't cheapen metrics, however. Some pretty meaningful (and, often, annoying) stuff has come from them.

For me 9.99 is 10. I don't know what they tested, but maybe they shall test again.

That's easy to say, but when it comes to shopping at the store, picking up several items and not actively thinking about it, are you really sure you aren't unconsciously interpreting that 9.99 differently from 10? Personally, I like to think that doesn't work on me, but at the same time I've caught myself saying something was '9 dollars' when I've been distracted and it was in fact 9.99.

And even if 9.99 really is 10 for you, it could mean that you're different than most people, rather than the methodology being faulty.

I found it odd that my girlfriend would say out the cents, because personally I have always been rounding up, and never considered the cents, for example.

I try to keep two things in my head when filling a grocery cart, an accurate tally of dollars and a numberless sense of "where in the dollar the cents remainder is presently", like the position of a progress bar on a screen. I find a remembered visual progress bar does not distract me from the arithmetic, and when I spot one of those silly prices ending in .95 or .99 the bar resets to a tiny bit and I add a dollar. My mental progress bar generally jumps in approximate ~1/4 steps and when the total is accurate to within $2 with many items that is a win.

Yep it's not science, but engineering

In 2012, JCPenney launched their "Fair and Square" pricing campaign, which included adopting whole number pricing. This campaign was considered a significant failure and is attributed with causing a 20% decrease in sales.

I don't think we can draw any conclusion from that campaign because multiple variables were changed simultaneously

The biggest ones in my mind, the ones my family had always played: they got rid of the game playing involved in buying during sales windows. This eliminated both the urgency to buy and the fun of feeling you were getting a deal other people weren't (this is all from memory I'm afraid)

I think the "no more coupons or discounts" played a huge part in this failure. This whole strategy was something brought in by ex-Apple Retail Store exec "Ron Johnson" when he became CEO in 2011.

My own speculation is that he tried to apply hard-line strategies that work when you have a unique good with strictly-set pricing (Apple products), but fall apart when you're selling goods that people can get anywhere for a variety of prices (e.g. Levi's jeans).

I'm sure this was mostly about people wanting to feel they got a bargain, and being programmed to shop for "50% off" sales.

It seems that perception of value is more important than actual price. In similar vein there have been many cases where sellers have increased sales of an item significantly by increasing the price to make it seem more valuable.

Of course both techniques can be combined.

Hard to control for this though. How did other department stores do in 2012? I doubt e.g. Sears were putting out great numbers.

The funny unique characteristic of the economic science is that it’s almost the only science without experiments. We can have a multitude of tests and get close to reality, but it’s impossible to reset the initial environment, control variables or test in isolation. You can’t reset people’s minds, so reproducing twice on the same island won’t give the same results, reproducing on two islands won’t either, and reproducing with 3 months delay won’t put you in the same season. Even biology and psychology are much more controllable. It’s definitely a science, but with the same criticism as chess being a sport.

I don't disagree at all with any of what you have to say, but indexing returns to a "category" does go some way toward accounting for e.g. the overall decline of brick-and-mortar retail and malls.

> When you price something as $9.99, you're signaling to your customer that you're trying to manipulate them. Whereas a flat $10 is honest.

JC Penney effect. They do it because it works. And most consumers don't reward honesty with better business. It sucks but at this point it's on the consumer.

And JC Penney was barely more than a decade ago. This phenomenon has been practiced for decades.

>Given the replication crisis is worst in these types of studies - the kinds of studies that beg to be the subject of TED talks - you have to wonder how reproducible these effects are.

Forget the lab tests, there's more than a few other live experiments to study (not just JC Penney, though I'm not sure if they did this even back then).

Yes but it turns out humans don't think critically most of the time.

This is just psychology.

Also everyone is doing this, and that’s a fact. If you do it differently, people will think there’s something wrong

I'm fascinated by these involuntary social protocols. Same as being too honest when everybody is spreading white lies. You end up being the bad one.

I wonder what field studies those.

> When you price something as $9.99, you're signaling to your customer that you're trying to manipulate them. Whereas a flat $10 is honest.

Singalling is honest too, y'know. :)

I wonder if adding a bit of randomness to the lower-order digits would make pricing seem more deliberate than manipulative.

If a product in a store is $9.86, it suggests there’s a reason for the specificity. The same product at $9.99 feels like it’s priced at the maximum they can get away with.

People in stores don’t calculate. People who buy software do. Like actual calculations: $10 / month / user * 100 users

In a store people often don’t even look at the price, just”I see cheese. Oeh, LESS than $3?”

Completely different target group

To me .99 signals that you care for affordability. Luxury products don't care about that.

That's why apple's pricing looks odd to me. Expensive prices minus one dollar

Plenty of stuff worth $3 sold for $9.99

Nobody trying to sell anything "cares for affordability" any more than if it's not affordable to the customer, he won't buy it.

That's not affordability, that's tricking someone into buying something that they wouldn't have otherwise.

If they buy something becsuse it's a penny cheaper, who's really being tricked?

The consumer.

$0.01 doesn't make it affordable, it's just a mind trick. You seem to be aware of this, yet you're defending it.

1. To be frank, I'm not dying on a hill for a penny. A fool and his money...

2. Even if you point it out... What changes. Has anyone ever seriously reconsidered buying a product when you tell them it's $500 instead of $499? What's the harm being done here?

3. What call to action are you suggesting? I'd rather work for laws to include sales tax in US goods' prices than fix this "mind trick".

I can't tell you how to live your life. But those are the reasons I don't really care.

> Has anyone ever seriously reconsidered buying a product when you tell them it's $500 instead of $499?

The effect seems to be because people subconsciously see the price as $5xx and $4xx. So I would guess yes.

Regarding point 2, it seems strange to ask 'what changes?' when the point of the article you're commenting on is showing how and why you spend more when presented with 9-ending items. If it was found to make consumers spend 8% more, quite a lot changes - and in a time of unprecedented household debt in the US, it seems like tactics contrived to get people to spend more are very much worthy of discussion.

Either way, it's a bit disingenuous to frame it as 'just a penny' (the actual quantity of money being spent isn't the point, it's the effect on people's spending habits) and bringing up some other problem to nullify concerns around this one is just bald-faced whataboutism. You can say you don't really care, and that may be true about addressing the problem, but making arguments for why this isn't actually a problem suggests you care about the topic in a way that compels you to dismiss it, at the very least.

My argument is different. The article is studying the macro situation, my comment focuses on the micro. You can argue an exploitative strategy on the macro, but the individual themselves is still getting a product they are assumedly fine paying for (and there's a big assumption that "people wouldn't buy it otherwise" if priced a cent above) .

The harm on the micro level is negligible, and you can even argue the macro level doesn't fundentally harm society like so many other modern tactics. Environments aren't impacted, liberties are not breached. Children are not exploited. There's no slippery slope towards some gambling addiction. It's not opening a door for hate.

>You can say you don't really care, and that may be true about addressing the problem, but making arguments for why this isn't actually a problem suggests you care about the topic in a way that compels you to dismiss it, at the very least.

It's a discussion, I care about seeing others viewpoints. But I don't feel very challenged here. The questions above are all the things I'd hope to have more viewpoints revealed on when I made my comment up chain. So far it's simply been 2 instances of "why are you defending this?" a question on me instead of a glimpse into you and the GGP.

It's a conversation, not a debate (invoking privation fallacy doesn't exactly change my mindset here. Even if I'd "lose" a formal debate). So I answered that question. I'm "defending this" because it feels trivial but so many are riled up about this. Claiming they won't even participate in purchasing such products. Which is baffling to me.

I More than free to clarify if that's unclear, but I hope I can hear others' viewpoints as well. Because I don't get the big deal outside of in a moral vaccuum. In reality, it's comparatively trivial even if we only focus on how pricing works (e.g. The US sales tax problem).

Fair enough, perhaps I'm bringing some biases into this since I think online discussion has a tendency to be very dismissive of less sensational or impactful topics. I really don't think you're defending the pricing strategy, trivialization of criticism isn't necessarily a defense of the object of criticism, although for how often the two are conflated I could see why you would think that is how your opinions are being seen.

I don't think households need to be spending 8% more of money they don't have (if we're considering rising household debt) when they go out shopping. The issue is probably more evocative than it logically should be for some people because of the aroma of deception around it. Making superficial changes to price to take advantage of human distortions in quantity to get them to spend more has at least a shade of deception to it (I don't say that as a valid argument, just hoping to lend some context for why people would get worked up over it).

If you don't think that's adequate to make it a 'problem'... well, fair enough, I'm not entirely convinced either. But I'm not seeing a very strong case being made for the contrary, besides 'other things are more important' and the interesting claim that consumers must not be impacted because they're still buying these products ("Of course they love their job, wouldn't they quit otherwise?")

Thank you for the thoughtful response.

I hope your prices end in 0 and are nice round numbers. There was a time when all the software and info products were whole numbers but ended in 7 for the exact same reason. "$10 is honest and $9.99 is manipulative" is pretty reductive.

I'm doing that these days at the grocery store. If your shit ends in an odd number, I'm assuming it's been shrinkflated. OJ bottle of 1.87 liter? Pass.

1.87L is 0.5 gal. The product is from the US since half gallon is common size and they didn’t bother changing the size.

There are products in US that are in nice metric sizes and weird US sizes. Like the 2L soda.

Ain't no reason I should have to buy a US product

What?

Why don't you just look at unit prices instead? That's the only price I ever look at and other than edge cases like trying new things or goods that you can't use up fast enough, there's no reason to look at anything else.

If your store doesn't have them, that's a sign you're at the wrong store and everything is overpriced.

Teach your kids this

PS: Walmart, which has pretty good prices, is famous for odd prices everywhere, so your heuristic would fail. All in all, really, a heuristic like this is a pretty weak way to try to be frugal and I can't recommend it. Just check the unit prices and shop at Aldi. Buy commodity ingredients, not trademarked factory food products. You can't help but spend a fraction of what other folks do when you just buy commodities by the unit price at a store serious about prices.

We don't have unit prices here.

In your whole country? Which one? I'm sad to hear it.

You know what they say about assuming.

I agree in part. We should have more people checking science like this project: https://en.wikipedia.org/wiki/Reproducibility_Project Overall I feel (and have no proof) that science is under pressure from so many angles. Climate change denial, conspiracy theorists and, as you ask, way more subtle things like overhyping marginal effects.

I mean, given that this pricing is used everywhere by basically every commercial body on Earth, and it is a pretty easily testable hypothesis (like, literally, you need like 30 people at most and a couple of sheets of paper), it’s pretty damn trivial to claim that.. most probably the whole market has done its homework and it is trivially reproducible.

> Integrity means a lot.

Does it? Has anyone priced out the premium integrity can command?

As anecdotally, it doesn’t seem to matter unless you have a sterling reputation. People with merely a good integrity reputation are better off selling it off until they are low ish integrity.

And if you compete on price, may as well abandon it entirely.

Agreed. And a sterling reputation may mean only good at hiding disintegrity.

> Are we selling our integrity for bad science?

Are we selling our inner peace for outrage over minor things?

Actually, the .99 price-point started as a clever way to prevent theft, manage inventory, and keep track of sales. The idea was that pricing something at $1.00 might tempt a cashier to pocket the bill, but pricing it at $0.99 meant they’d have to open the register to give change, reducing the risk. Back then, most registers didn’t print receipts.

This method also helped with inventory control. For example, if the total sales for the day ended in .56, it meant 44 (or 144) items were sold, no matter how many customers bought them.

This pricing strategy stuck around because it was really useful for running a business smoothly.

> This method also helped with inventory control. For example, if the total sales for the day ended in .56, it meant 44 (or 144) items were sold, no matter how many customers bought them.

That seems like bollocks, who cares about a technique for tracking total number of any items sold? That isn't helpful for inventory management at all? And even if you had only a single product, or you totalled sales separately for some reason (and inexplicably by sale price rather than just tallying sales), you could then just divide by the price, you don't need to coerce the total into being a tally mod 100.

>who cares about a technique for tracking total number of any items sold?

Pre-digital calculator salesmen? Time is money and being able to do a quick mental math can be helpful before doing a more detailed inventory

>you could then just divide by the price, you don't need to coerce the total into being a tally mod 100.

That's why they gave more than one reason. Why laser focus on criticizing a single one?

> Pre-digital calculator salesmen?

For what purpose? Say you're a salesman of 7 different products/SKUs; you sold 186 products today. What do you do with that information?

You're still hyper fixating on one single point. And I'm not a businessman. I imagine businesses never do one thing for one reason like software functions.

Bankers can tell a lot from a security standpoint based on seemingly frivolous data. Maybe it's the same logic here. If you end every day swelling exactly XX0 products, something is amiss. It at least prompts a deeper investigation, since running through weeks of receipt/data takes more time pre-computer.

I'm 'hyper fixating' on the point that seemed nonsense to me, that I commented on, and that you replied to.

?? It lets me know how effective a product I'm offering is being sold? What do you mean?

I guess you can think of it as a "checksum". If your inventory count doesn't match the sales sum, something is wrong

Interesting, but not true.

Registers that don't record receipts also don't record when it's opened. Even if they did, cashiers could forego opening it and provide their own pennies in order to pocket the 0.99 difference.

The .99 pricing is typical black & white smiling mid-atlantic accent gray flannel suit slicked hair over-jovial grinning 50s/60s mad men salesman stuff.

> Actually, the .99 price-point started as a clever way to prevent theft, manage inventory, and keep track of sales. The idea was that pricing something at $1.00 might tempt a cashier to pocket the bill, but pricing it at $0.99 meant they’d have to open the register to give change, reducing the risk. Back then, most registers didn’t print receipts.

Wouldn't the extra labor required offset any potential savings? (More time per transaction means you need to hire more cashiers to keep checkout line length down.)

It's a small form of security, and we've traditionally traded some convinence and efficiency to mitigate theft.

Yes but in this case it's a weak form of security, for a significant efficiency loss. I'm sorry but I don't really believe that most businesses would look at this tradeoff and decide it makes sense.

We're talking about a pricing scheme conceived in a time right around the birth of the assembly line. And right around the stock market crashed.

Everything wasn't about raw profits once upon a time. So a small piece of mind makes sense.

this feels apocryphal and appears to be one theory of many[1] (also - just take out an extra penny during the next transaction). to quote cecil adams "trying to find out who invented [psychological pricing] is like trying to find out who invented the hat."[2]

1 - https://en.wikipedia.org/wiki/Psychological_pricing

2 - https://www.straightdope.com/21341889/why-do-prices-end-in-9...

I don’t know if this is true or not, but it’s clever and interesting regardless.

Was the $.99 price point really invented at a point in history before sales taxes came to be established? Round prices have never been convenient because it always come out to $1.07 1.08 1.09 something like that with a mix of state and local tax added

Plenty of places in the world (most/all of Europe at least) include tax in the .99 price. If I go to the check out to buy something that is priced at £9.99, I will pay £9.99 as the 20% is already accounted for.

Both of those use cases seem like they'd only work if there were no sales tax to collect.

Sane countries (almost everywhere but the US), have sales-tax included in the consumer-listed prices.

As you point out, sales tax isn't pre-calculated in the US, and yet .99 prices are ubiquitous here.

There's a lot underneath your comment.

For instance, when you buy something and get a receipt - it is not for you the customer. It is to keep the employee honest. If there is no receipt, it might not have been entered into the cash register.

Now with electronic payments a lot of this risk has gone away and receipts are becoming optional.

Also, I remember some people telling me in their stores, the last digits of a product were secret code. Like ending in .23 (i made this up) meant the product was being discontinued and only stock on hand was available. There were other codes for other things.

Costco does that. If a price ends in .97, it's been discontinued. If a price ends in something that isn't a 9, usually means it's on sale. You can look up the exact details.

in china, businesses are required to use government managed software that will automatically handle taxes and print on government issued receipt paper. for a while the receipt paper included a scratch field where consumers could win something in order to motivate them to demand a receipt. at least once we won more than we spent. some 2digit amount in dollars.

In Brazil we have an entire PKI based receipt system, every single purchase generates a full listing record straight to a government database sent in realtime (or later, in "contingency mode" as called, if having network issues). A lot sales also include the customer's personal tax-id... no privacy for any purchase at all. It's required for everything, even a liter of milk from the corner bakery.

This is also the electronic version of an older, paper based system, called Nota Fiscal (lit Fiscal Receipt) ... legally, every single item carried around the country must have one. Of course this was/is a major enabler for selective police action against "undesirable people" moving trivial stuff from a home to another, etc.

The government-managed (or at least government-certified) software is not just China, but also large parts of the EU.

> government-managed (or at least government-certified

Huge difference.

to be fair, i don't know how much different the chinese management is from a european certification system.

we were told to use specific software. and for sure that software is created by some company that may or may not be government owned. i don't know if there was any choice since, as is typical with foreigners, someone will just tell me their recommendation and not try to explain the differences between choices, unless they matter. ie: just go with the default.

i did have the impression that different regions use different software at least.

i expect that potentially in european countries there are multiple competitors for the same software, but i don't know that either.

so for all i know the amount of choice and control in china could be the same as some countries in europe.

I think the point is less ownership and more remote access.

ah, well, what i had in mind by the term government managed had nothing to do with remote access. i was only thinking about the ownership of the software, not how it works.

Price endings were absolutely a thing at circuit city back in the early 2000s. .98 .97 and.95 all had meanings. I can’t remember how they mapped but it was something similar to “vendor discontinued, CC discontinued” and something else maybe ha

Customer facing reasons for receipts in no particular order:

- Expensing purchases to their employer or self-owned business

- Record of sale to be used in returns

- Reconciliation of spending with cheques or credit card statements

- Budgeting and accounting generally

My suspicion is that most business owners don't care about ANY of that.

even returns - it might actually be enough friction that returns would go down.

for example, why would a donut shop give receipts?

I have a friend who recently opened a bar. He did cash in the beginning, but finally got the electronic payments for the bar installed. He immediately caught a bartender stealing.

He noticed that at the start, the bartender got a lot of tips. But when the electronic payment system went in, the tips were not anywhere near as much. He reviewed everything and found the people in the bar do not tip well.

What the bartender was doing was selling drinks and putting many of the cash sales entirely in the tip jar. When the electronic payment system went in, he wasn't handling as much cash and the lower tipping rate showed up.

> for example, why would a donut shop give receipts?

Because of members of a social club, whose turn it is to buy the donuts, wants to have it to give to the treasurer so that it can count against their monthly dues.

The more general answer is because, at this point in time, a receipt is universally expected. I'm not denying that businesses have internal reasons to hand them out, and keep a copy, I'm saying that customer demand played a role at the time this convention was established. They've become increasingly useless on the customer side, except for business expenses, where they remain vital.

It might be because an electronic payment system can accept exact tender and / or the options to tip defaults to lower payment options / easier to hide a small tip to your friends

With cash few have exact change and the table can see what you give. This leads to rarely asking for change back and putting higher amounts as it ups your social ranking.

This effect is easier to see in a bar.

Often you need to keep track of dollar per unit sold as some staff will overpour

Although employees should get the benefit of the doubt (and he did in the beginning), the camera footage eliminated all doubt.

> pricing it at $0.99 meant they’d have to open the register to give change, reducing the risk

How does opening register reduce risk?

I think it's more like "have to record the sale and produce a receipt". The customer wants their penny, so you have to ring it up.

Now if you steal a dollar, your totals at the end of the day are off a dollar.

But, if you take the dollar with no recorded sale, your counts are good.

But OP's comment also says

>Back then, most registers didn’t print receipts.

Registers that keep track of how much should be in the till, based on the day's sales, those have been around quite a long time. NCR got big enough in 1912 that they had antitrust trouble. Their big selling feature was tracking the till.

https://www.asc.ohio-state.edu/economics/pdf/marvel/ncr.pdf

Seems unlikely, given that the inventory control idea falls apart as soon as you suppose there’s items priced below $0.99.

This would be decades ago, so many useful products would indeed be below 99 cents.

This does absolutely nothing since the cashier can just have pennys in their pocket.

I'm skeptical about the theft aspect. Couldn't a dishonest cashier just keep some pennies on-hand and pocket the bill anyway?

How is it useful is any of this today? Everyone uses point-of-sale systems and credit cards.

You've obviously never worked in retail of any kind if you think the number of cents at the end of the day is useful for anything.

And you're "correcting" an article which has citations, based on what? A story you heard? Citation needed, buddy.

Come on.

I don't have any evidence for this, but intuitively it feels like this must be true for much of the bell curve of humanity. In other words, it probably doesn't work very well for some sets of folks. It's very easy to look at $18.99 and mentally think "$20 once taxes hit," which ought to dispel the illusion. It makes me wonder if there are some market segments which intentionally avoid this sort of trick since it is either ineffective or offensive to their customers. Sort of like how Wal-Mart doesn't generally sell luxury products, but in reverse.

I think it matters for the audience who's looking at that first number - so if $20 isn't a lot to you, you wouldn't care that it's $19. Comparable to a $1599 macbook pro. I think if there wasn't a positive effect on sales, large corps would've dropped it long ago.

> It's very easy to look at $18.99 and mentally think "$20 once taxes hit," which ought to dispel the illusion.

What illusion?

One possible explanation is that .99 prices are so well established that prices that don't end in 99 stand out, prompting a more conscious analysis by the customer. If round prices were the norm, it would work the other way. Similarly, if prices always ended in .01, those that didn't would stand out.

In many countries in Europe the price of products is always written including tax.

I didn't see it mentioned, but there's sometimes another factor:

When a store is selling things for .00 vs. ".99" (or any other fractional amount), I assume it's a premium-priced store. They sure aren't rounding down to those numbers.

(Or, many times when I see .00 numbers, it's slightly upscale clothing stores, who're maybe using .00 to seem more upscale, but who also have near-constant significant "sales". So if I see a .00 without a large "sale" discount, then maybe I'm there the wrong day, or someone hasn't yet been around with the price sticker gun yet that day.)

But when they're using fractional numbers, that says they're more likely targeting more pricing-sensitive buyers, and I'm also not paying for the upscale pretense.

> premium-priced

I've seen this on menus and wine menus that write prices like 5 or 4.5 -- everything rounded to 50¢ or $1 -- I think trying to appear upmarket.

What does this theory tell us about MacBook Pro at $1,999?

I’m not sure how much I see .99 at upscale or at least midlevel clothing stores but pricing like $199 is pretty common (as are sales).

I realize that this post is old, but there are some errors in the revenue tables:

- Dress #1 revenues are swapped for the "$5 less" and "$5 more" columns. - Dress #4 units purchased are swapped for the "$5 less" and "$5 more" columns (from the study they've linked before the tables) - Dress #4 revenues are also wrong, even without considering the previous mistake

This doesn't change the conclusion of the paragraph that much (42% instead of 48%), but this doesn't inspire me much confidence for the rest of the article

> They ran the experiment for two days. During this time, 241 people bought cheese. When they saw .00-ending prices, they bought cheese 44.1% of the time. But when they saw .99-ending prices, they bought cheese 51.2% of the time.

> This study not only confirmed that .99-ending prices lead to more revenue

Er, surely that depends on the rest of the price e.g. 1.00 v 1.99.

The only price I ever compare and look at is €/gram €/liter. For my cheese that would be 6-8€/kg

> €/gram €/liter

And when you see 0.99 €/gram ? :)

This is a thing in Germany, e.g. one large grocery chain sells "premium" tomatos for prices like "1.99€/100g", which makes intuitive comparison hard for some, especially because those who look for prices per mass usually compare kilo prices, and most are just used to 200g or 350g trays, sometimes a pound, not comparing prices per weight at all.

It’s curious that the “studies” cited all have wildly differing outcomes. It makes the first example given with a 48% increase seem very questionable and possibly misleading, when all the others are single-digit increases at best. How much more do people spend? Is there a stronger meta analysis somewhere?

The bottom of the article launches into spoken number frequencies. The caption under the digit frequencies plot claims “the decreasing frequency of numerals is due to the organization of our mental representation of quantities.” This seems to be simply Benford’s law, and the plot of numbers across languages suggests the same. Assigning this to some mental process or cognitive bias for small numbers seems like it might be inventing an incorrect explanation.

https://en.wikipedia.org/wiki/Benford%27s_law

I have an odd case on this question…

My business _buys_ tickets from people, so deals happen when we offer to give them $99 or $104 or whatever for their tickets.

I wonder how this psychology works when someone is offering to _pay_ you? Thoughts?

Do people like to receive money ending in a 9 as much as they like to give it?

No surely the same logic applies so receiving $100 looks more better than $99 than it really is. (And $105 than $104.99, etc.)

> Stevens Power Law says that to double the perception of brightness, add 4 times more wattage.

Interesting fact, but I wished they wouldn't use the confusing formulation of "adding 4 times more" which sounds to me like a five-fold increase.

A macbook air at $999 is always more attractive than one at 1000, 1015 or 1021. After taxes sure it will go over 1000 but usually when we're browsing for prices first impression always matter

I am curious why. When I see the .99 style pricing I immediately round it to the closest number that makes sense to me. Also unless I am buying large quantity I do not really care whether it is $9 or $10

I do this too (the rare times I'm at a place that does this) but that doesn't mean there's no adverse consequences. I would be interested if the effect still shows for people who consciously round up.

My assumption is that _most_ people anchor to the $9 in $9.99 and don't mentally round to $10. Me, I mentally round up and appreciate companies that use nice round numbers.

> traditional economics predicts that raising a price results in fewer units—and fewer units, even at a higher price, means less revenue

This is false and a very basic mistake. Sometimes higher prices lead to more revenue, even with fewer units sold.

In this case it certainly does, since the price is less than 1% higher for items priced above $1, .1% above $10, etc.

Free business idea: VR glasses that turn $x.99 price markings into $(x+1).00. The glasses cost $x.99.

The kind of person who looks at this sort of thing and says, "Hey we should use this to manipulate people" is the kind of person our society needs less of.

I'm sure Hacker News will have some earnest argument for why this form of competition is actually good for people.

> sure Hacker News will have some earnest argument for why this form of competition is actually good for people.

Nope, the current consensus this time is HN assuming they know better than a researcher (and decades of business) and inserting their own opinions.

>The kind of person who looks at this sort of thing and says, "Hey we should use this to manipulate people" is the kind of person our society needs less of.

Ever since JC Penney, I grew apathetic. People want to be tricked, why ruin their fun?

I get where you are coming from.

Books like Influence the art of persuasion and Thinking fast and slow wrestle a bit with the morality of studying this kind of stuff.

It’s certainly possible to misuse the insights to manipulate others, but it’s also important to be able to recognize when and how you’re being manipulated.

I'm not criticizing the researchers--facts by themselves aren't moral or immoral.

It's the people who use this sort of pricing model that I'm critical of. It's sort of a moot point though, given this method of manipulation is so deeply embedded in our economy at this point.

It reminds them of 1999, objectively the greatest year in human history.

One of my friends always say e.g. a 29,99€ item as "over 20€", while I directly round them up. It has caused several cases of misunderstanding because when I mention something costs 30€ he can't match the 29,99€ item in his mind. I believe thr number perception can be trained and proper calculated can be attached to the moment a number is seen.

This is on purpose. Our brain associates for example 9.99 closer to 9 rather than 10, therefore pricing something at 9.99 is like pricing it as 10 but advertising it as 9. It's pure and simple manipulation, which is what all sales techniques are based upon.

It's been a couple of decades since I last lived in the UK but I remember quite well that Marks & Spencer had rounded pricing (no .99 deception). I wonder if they kept it up and if they are still doing well over there.

In the US gas prices at gas stations usually also show a tiny 9/10 of a cent in addition to the x.xx price, i.e. actual price is x.xx9 and I have never seen any other value for that 3rd decimal place

That 1/10th of a cent savings might have looked good when gasoline was 39.9 cents but it's a constantly shrinking share of the cost of a gallon of gas that might psychologically be making the number look bigger as it is more digits. But since everyone does it, no one has an advantage or disadvantage because of it. Maybe when gas gets above $10/gallon gas stations will decide it's better to drop the 9/10th than to purchase new signage and pumps that can handle an additional digit.

Except of course for Donny’s Discount Gas.

The psychology is fascinating. I would have thought that $1 feels smaller than $0.99. Two nines feels heavy. But despite what my mom would say, I’m surely wrong if everyone else is doing it.

I feel the same way and thought about this in the past when trying to come up with a way to compare two subjective numbers. I can't calculate whether a clock with lit-up hands is 7% more valuable so I need to use subjective judgement and I didn't want the number itself to be influencing me in irrelevant ways. One of the options being just over a round number seems to influence me, and it's not even necessarily the 9-at-the-end effect: consider 253¤ versus 282¤ versus 312¤. Whether you pay 250 or 280 isn't a huge difference, but going for the one over three hundred... oof! (The prices are actually equidistant: each ~10% or ~30 currency units apart.)

I never found a solution, but one idea was to scale competing products to a range of, say, 13 through 17. That will never cross any round number boundaries and one also can't use shortcuts like "it's essentially a tenner". I think that's when I discovered that it's very often down to two options and that anything scaled down to a range of 13 and 17 will turn into... 13 and 17! Surprise! I was not the smartest teenager.

Have you, or has anyone else reading this ever noticed this or given it thought, or even found a workable approach?

Only if you assume that all numbers are printed in the same font size. Many stores would print their prices like this: https://as2.ftcdn.net/v2/jpg/04/43/75/73/1000_F_443757335_WE...

So, the $0.99 feels like costing 0.

It's really about the leading digit being one less. Our intuitive sense of quantity knows that 1X is always greater than 0Y, and that on average given random X and Y, 1X is three times 0Y.

Our mind is a superposition of intuitive sense and reason, so even when we can reason that they're very close in price, our intuitive sense still plays into our decision-making. That's my theory anyways.

I think it does feel smaller, but only if you always leave off the cents. $0.99 feels smaller than $1.00, but $1 feels smaller than $.99 or 99¢

First job for all day AR glasses is to kill off this nonsense. Superimpose the rounded up price and blur the advertising out. Also add the markup so the customer knows that $2 Arizona iced tea was bought for 35c.

Actual first job for all day AR glasses will be to spam you with ads everywhere.

See Hyper Reality: https://www.youtube.com/watch?v=YJg02ivYzSs

That's not just a flippant reply. The fundamental purpose of invention in our society is no longer about benefitting our lives.

If they invented consumer travel to Mars tomorrow I'd have no interest. In 2024 it would be stupid to believe the customer experience would take the form of anything better than the Star Wars hotel.

The “fundamental purpose of invention in our society” has been for military advantage more often than not.

You can call it marketing if you're really cynical. What client has more money than the government, and the budget to spend in the trillions?

I had always daydreamed of the inverse. A world where we get rid of road signs because the cars HUDs fill them in for us.

But there’s some grotesque likelihood to the idea that the world ends up positively littered and we use technology to filter it out.

When counting my share of the restaurant bill, I always have to make a cognitive effort to round all prices up one last digit. However, when visiting a restaurant, I don't care about individual prices; I can easily see the restaurant's "price grade" by looking at several menu items. These mind tricks make me sad.

I wonder. Prices ending in some number of nines have been around for a hundred years or more now.

Perhaps we're so used to everything priced ending in 9 that we now subconsciously think that anything not priced in 9 has something wrong with it?

Well, 69% of people believe completely made up statistics without doing any of their own fact checking, so I'm not that surprised.

Except for products where the price is itself a feature. For example a Luis Vuitton hand bag. They show round prices like 2k or 3k.

Yes, that's why .99 was invented and survived.

McDonald's knew about this many years before 2018

I think everyone did...

(In fact the linked study - the link is broken, but it's available here [0] - is from 2003.)

[0] - https://www.kellogg.northwestern.edu/faculty/anderson_e/htm/...

LLMs don't understand numbers but neither do people.

.99 is actually a pricing psychological strategy. Strangely, you won't often see this kind of pricing in offline retail stores, only during promotions. However, online and offline are different. When paying online, people's consumption psychology is more impulsive because you don't take out cash when paying; you just pay a number, and the money is deducted from your bank card. I still quite understand why online pricing is set at .99, because my own website also uses it haha.

What?

> Strangely, you won't often see this kind of pricing in offline retail stores, only during promotions

I think I see this whenever I enter a regular supermarket.

> When paying online, people's consumption psychology is more impulsive because you don't take out cash when paying; you just pay a number, and the money is deducted from your bank card

People overwhelmingly pay by card at actual shops and rarely use cash.

This may depend on the location of course.

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