The Psychological Difference Between $12.00 and $11.67 | Hacker News Reader

The Psychological Difference Between $12.00 and $11.67

theatlantic.com

128 pointspmcpinto60 comments

I've always seen the difference between round numbers as being a question of arbitrariness.

If the price for a new TV is exactly $1,000 it strikes me as a price that was arrived at arbitrarily. $999 just gets rounded up in my head. Whereas when I see an amount like $1,012 I feel like -- rightly or wrongly -- that there must be some logic behind the price. That it represents a price set for a reason other than mere marketing.

I generally think the same thing, but then assume that they marked it at that price specifically so people would think that. So generally I assume any price is just some sort of marketing unless I can see the actual breakdown of the price.

It might well be that it was a target price but there is actually a fair chance that the company may have achieved it by tightening their margins rather than expanding them.

Source working for a TV manufacturer and knowing how desperate the sales teams were to get prices to hit certain magic "price points".

I'm not saying that it always works this way though.

Especially true with things like TVs, where sale prices are often loss leaders with the stores planning to make it up by selling lots of overpriced cables and other accessories to the buyers.

I agree. My explanation is that numbers like "$1,000" and "$999" seem like opening bids--so not only are they arbitrary, they're higher than what the seller is willing to accept. Whereas "$1,012" at least seems like it's already done some negotiating with market forces/demand.

I see this a lot with bidding for government contracts, it's a known trick. There's a sign near me describing the new pipes going into the ground replacing the ditches, it says the contract went to some company for something like $12,345,122 (not sure what the real number is, just an example). I've seen similar numbers on signs at my university describing contracts for new buildings.

Amusingly, this sort of thing happened with the first measured height of Mount Everest. It was measured at exactly 29,000ft, but they fudged it to 29,002ft so it didn't look like an estimate.

Source: http://www.jstor.org/discover/10.2307/2684102?sid=2110577666...

They fudged it only for a small portion of world population that's using body parts lengths instead of metric system to measure things.

It's exactly 8.8392 kilometers, seems highly scientific.

I'm sure they use some crazy equation to come up with that number.

I never considered this with prices. Interesting.

Which is odd because I always consider this with project deadlines. Whenever I see deadlines of the 1st or the end of the month I know it is a date picked out of the air and not based on the actual work required.

Worth mentioning that Costco has a cap of 14% margin on everything except Kirkland brand goods, which are allowed up to a 15% margin. In that case, weird pricing may genuinely be because they can't charge more for it.

Costco also has a code encoded in the last digits of the price, different last digits mean different things.

Many online retailers do this. I personally know of REI, Nordstrom and Best Buy who have done these types of price encodings.

Not really related. When the N64 had been out for a while it was £99.99. My brothers and I begged for it, but my mum said it was too expensive and she would consider it when the price went down. Later that week we were all watching the TV together and an advert for the N64 came on, and at the end it said "Buy now for £99.98!". We all celebrated until my mum said that didn't count. We never got one in the end.

I liked your story, but was bummed at the end "We never got one in the end." Haha You should go out and get one online now! You deserve it! ;) haha

When i took a trip to Paris from the US a while ago i thought it was awesome how tax was included, and the majority of the prices were even or multiples of useful coins, so that .20euro coins were the smallest i needed to worry about.

That and its super easy to figure out how much you owe when its simpler numbers with tax included.

until that one store who used .99 or other oddness everywhere and now i had a pocket of "useless" tiny coins to deal with.

I'm told that when they switched from Francs to Euro it allowed shopkeepers to do some advantageous (to them) rounding from the x.99F to x.90Euro.

Overall the .99 is not so spread in Europe (.95 is more common I guess). The VAT is included in the retail price by law within the entire EU. VAT is state global but it might have different rates for certain products or services (like books, baby food, hotel) in some countries.

Most people visiting the US would consider the hidden tax unfair.

About switching from one currency to another, in most countries the effective prices rose. Some notable recent exceptions are Estonia and Latvia where the previous prices (resp. in Krona and Lats) were kept on the price tags by law for months past the switch.

VAT is state global

Nit pick: this isn't strictly true - Spain's various islands (Balearic islands, etc.) have a different VAT rate to mainland Spain. And there are 2 towns in Austria with the same VAT rate as Germany's, not the rest of Austria's - one is an enclave in Germany, the other is only reachable by road via Germany. There are probably other weird VAT exceptions, but in any case, consumer prices must always be quoted including VAT.

On the opposite side of the fence, whenever I am in Canada I will repeatedly be caught off guard by the actual price not being what's on the label. Even little things, like handing over a dollar at the dollar store to a look of disdain from the clerk. Or buying a bunch of books, doing the maths in my head, and handing over too little cash without paying attention to the cashier.

Yeah, even though I was prepared for the fact that prices in America don't include tax, I was still astounded when I discovered this applied to dollar stores as well. To me, half the point of a pound shop is that the change is easy.

FWIW I've been in tens of countries and the only place which does not include taxing in the price was the US.

Regarding the other subject in your comment, I think this sort of initiative[0] by certain countries is definitely commendable.

[0] http://en.wikipedia.org/wiki/Euro_coins#Price_rounding

I also don't like that in the US you never can tell how much something will cost you at the end. I remember on my first trip I had one dollar left, bought candy and at the cashier was was told it would actually be 1.09.

Same for cell phone planes and internet. There are always seemingly random charges added to the final price.

> I've been in tens of countries and the only place which does not include taxing in the price was the US.

You need to visit more countries then.

The reason for not including the price is that taxes can vary by city. Which makes is impossible to place an advertisement that lists the price in a wide area.

Any country that has local sales tax will be like the US in this.

And I personally think the US should just round to the tens place and forget both the nickel (5 cent) and the penny entirely. They'll have to issue a new coin in place of the quarter (25 cent) so it'll never happen, but it would be nice.

I've been to ~15 countries in Europe, a couple in Asia and the USA. The latter was the only place I've witnessed it. That's not to say it's the only place it happens, but it certainly seems anecdotally to be a rarity.

Maybe instead of a snide reply to your parent comment you could've given an example of another country than the US to have this issue caused by regionalised sales tax differences?

Canada.

This depends on the country. In Germany I get exact change, which includes very annoying 1 and 2 cent coins. In Holland shops round up (and down, perhaps) so you always get back 5 cent as a minimum.

Numeric system with negative digits are interesting in this respect. If you read 11.67 as actually 12.3̅3̅ (with 3̅ = -3), then it becomes clear that you need to give a ten and two bills, and get some change.

Or said otherwise, when paying, you should round up in your mind, not down...

Apparently you make much more money (in a restaurant setting at least) if you omit the currency, use round numbers and no decimals.

Rabbit with oyster and samphire - 7

Rabbit with oyster and samphire - £7.00

Yeah, I nearly got caught out once when I went to a restaurant and ordered wine "number 23", thinking it was like a Chinese Takeaway menu or something. I was wondering why there weren't in order! Got an odd look from the waiter too. Lucky I didn't go for wine number 200.

It's interesting how a bunch of subtle tweaks to a restaurant's menu can increase spending: http://www.menucoverdepot.com/resource-center/articles/resta...

This may just be me (or maybe London/UK-related), but in my experience restaurants/bars that list prices as just "7" are generally more up-market (or want to be), and having that connection in my mind I tend to pay more attention to costs when I see it like that, as I'm already expecting a not-tiny bill before I even start thinking about the prices themselves.

It's a form of (marketing?) deception, isn't it? One that's been running for so long that it altered how people perceive prices. Am I the only one who doesn't like these kind of practices?

I don't either, but my method of countering it is to round the price to the nearest dollar in general.

I think most people do that, question is whether that also negates any subconscious perception modifiers (sorry, I don't know what else to call that). Like when "feel good" commercials make you associate the product with good feelings unless you actively resist that.

(Disclaimer: I hate this kind of advertising)

We would both agree that it's an attempt to alter the _perception_ of the price, but I would find it a struggle to call it a deception.

I understand that sales are greater with a price of $59.99 rather than $60. But how much greater? Can anyone point to an article that quantifies the effect?

Here is an interesting study done on it. PDF warning.

http://www.jem.org.tw/content/pdf/Vol.9No.2/06.pdf

In design (UIs, pricing, etc.), there is a constant battle for attention & processing between emotional and cognitive. Round numbers and solid icons are understood and don't set off mental red flags. When things become more difficult to understand, we either assume (correctly or incorrectly) or have no choice but to make an effort to fight those expectations.

On reddit, there are popular subreddits like /r/oddlysatisfying, /r/mildlyinfuriating, and /r/mildlyinteresting that demonstrate intrinsic attraction and repulsion to said expectations.

In the world of interface design, there's been some debate regarding solid vs hollow icons in terms of processing. Here's a well researched article that sheds some light: http://viget.com/inspire/are-hollow-icons-really-harder-to-r...

Our supporter plan for neocities.org is $5. We talked about saying $4.99, but I felt that this is deceptive marketing so we didn't do it.

To me, it's a tradeoff between the possible increases in signups you get from using a .99 price, and the level of trust you potentially lose from engaging in psychological manipulation of your users.

I'm comfortable with $5, even if it does cost a few customers. Being straightforward with our pricing builds a story of trust and honesty that I like.

Not that it is related a lot but reminded me of this

https://news.ycombinator.com/item?id=8274084

Interesting. I've actually read that it's for a different psychological reason: nines are big numbers, and make others look smaller. So in $20.00 you have a first digit of 2 and inconsequential zeroes, but in $19.99 you start with a 1 and make it look even smaller next to the imposing nines.

(Wish I could remember the source but I don't.)

What about gas prices? Why do we, as a country, put up with "$2.59 9/10" as a price? It's ridiculous.

Status quo? I dont see it as any different than "putting up" with $x.99 prices, its just not enough of a difference to change behavior. The quirky gas prices date back to a time when gas cost $0.25/gallon, so the 24 & 9/10 cents was a significant margin increase (vs 24 cents) on a product that was, and is, a low margin product (at least at retail).

11.67 is practially less than 7.50...

Personally I find it insulting. 9.99 prices are designed to deceive, their sole purpose is to hook you, anchor your decision process on MEANINGLESS numbers. When I see prices like that I know its a scammy place, and they designed it thinking Im a sucker.

Sooner you learn to ignore them the better for you as a consumer. Metacognition will set you free.

This isn't the first time where I've read that someone doesn't understand why prices end in .99 and I'm surprised no one seems to know though someone in the comments in the article came close.

I've owned restaurants for 30 years. When I first got into the business, I was told to always end our prices in "9" because when you add up the prices of items you sold, it should always end as .....

And that is where I, too, have forgotten. It was an accounting thing as mentioned in the comments. Should be easy to Google or look up. I don't know if anyone does it for that reason anymore. We certainly don't.

I'll leave looking that up as an exercise to the reader.

Unless you are talking about the embezzlement issue - i.e. employees pocketing single bills paid by the customers, which may get harder when you actually have to give back the change - your exercise has greatly outran my capabilities.

it was considered slightly more difficult for employees to add up prices ending in .99 accurately, therefore making it more difficult to steal by taking the money and not entering it in the till.

If that were the case, I'd price everything ending in .73 .

Or any huge number of variations, the more the better because people can learn patterns very easily.

I don't know if this is a useful exercise, but the main reason is psychological pricing [0].

If you say that all prices should end in .99 due to some other reason than having the customers perceive the prices as lower, one possibility is that if all prices really end in .99 with no exceptions, then you can do a check on the number of items delivered based on the cent digits of total price: "the sum is $82.91 - were there nine dishes sold?"

[0] http://en.wikipedia.org/wiki/Psychological_pricing

Although, in the UK some big chains moved away [0] from the .99 prices because everybody knows that it's just a marketing trick and having round numbers seems more 'honest'.

That was a few years ago, maybe they've gone back to it since...

[0] http://news.bbc.co.uk/2/hi/uk_news/magazine/8159072.stm

I suppose the .99 psychological pricing works as good as ever (UK and elsewhere).

A somewhat silly angle to this is that while most items are sold with prices in euros and cents, over here automobile fuels are sold with three digits after the euro in the price. I.e. a litre of petrol/gas is 1.399€, not 1.39€. The third nine is generally shown smaller in the price ads. With the volumes of trade being large and margins small, this makes a lot of difference to gas station chains.

This is even more funny because elsewhere even the euro cent is too small. We don't use euro cent coins here; the rationale by government was to reduce the cost of handling small coins. Thus all shopping is rounded to the nearest 5 cents, and this also applies to credit/debit card payments.

If .99 is used consistently, the distance to the nearest whole number tells you how many items were sold, which is useful as double-check (also subconsciously).

39.94 = 6 items

But if this was the reasoning ending in .01 would surely make more sense.

39.06 = 6 items

79.59 = 59 items

Change giving becomes much more difficult.

Just apply a $0.01 discount at the register for customers paying in cash. Your total is $34.06, with a $0.06 discount. Your change is a $1 and a $5 from $40. Thank you, come again.

A $0.01 discount is a lot easier to swallow than an additional $0.01 change-making fee on each item.

The arithmetic would be too much for a large number of tillers, who can't do much more math than count change.

This still misses the other main purpose of the .99p, which was to force the tiller to open the till to get the change (thus, reducing the likelihood that they might just pocket the money handed to them).

Reply on news.ycombinator.com