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.
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.