Why Do Some Prices End with ‘.99’ While Others Are Rounded Up?

Ever wondered why most prices end in “.99,” while some others are rounded ($20.00) and yet others seem to have little rhyme or reason ($16.34)?

There are two theories for why ending prices with “.99” increases sales, according to The Atlantic. The first theory involves the left-digit effect, which posits that the human mind puts the most emphasis on the numbers to the far-left, so that the perception of a $19.99 price tag leans more toward $19 and less toward $20, even though $19.99 is closer to $20. The second theory simply says that prices ending in “.99” seem more like a bargain.

So what about (other) non-rounded and rounded prices? According to a new study published in the Journal of Consumer Research, it comes down to whether customers are being asked to rely on reason or feelings.

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Study authors Monica Wadhwa and Kuangjie Zhang write:

“A rounded price ($100.00) encourages consumers to rely on feelings when evaluating products, while a non-rounded price ($98.76) encourages consumers to rely on reason. When a purchase is driven by feelings, rounded prices lead to a subjective experience of feeling right.”

After conducting five experiments, Wadhwa and Zhang found that rounded prices are more likely to make consumers purchase a product when it’s driven by feelings, or when the items are recreational or personal in nature, and non-rounded prices are more likely to do the same when the purchase is rational or practical. That means, for instance, that a Gucci bag would sell better with a rounded price, while a box of trash bags would sell better with a non-rounded price.

Now that you know all this, it should be a little easier distinguishing between whether a purchase is more of a want or a need just by looking at the ending numbers on its price tag.

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