If the price ended 99, you most likely overpaid

This holiday season, you’ll probably see the number 9 everywhere as you browse the aisles. That box of holiday candy costs $4.99, the TV costs $299, and the fashionable headphones cost $99.99.

We seldom ever give the pricing strategy of employing nines to price goods just below some significant barrier a second thought, and when we do, we probably feel sorry for the unsuspecting consumers who don’t realize that $99.99 is equivalent to $100.

However, the truth is that, without you realizing it, you have probably been caught off guard by 9-ending costs. Researchers have discovered an unexpected aspect of 9-ending prices. Not only is $9.99 not always a better price than $10, but it’s also frequently not at all.

Daniel Levy, an economics professor at Emory University and Israel’s Bar-Ilan University, claimed that “the 9-ending works some magic to us.” Based on years of data from American grocery stores, Mr. Levy and Avichai Snir of Netanya Academic College in Israel discovered in a 2021 study that prices for the same commodities were often 18% more when they ended in 9 than when they had other ends.

The finding was consistent with a variety of products, including cheese, crackers, canned soup, bottled juice, dish soap, painkillers, cigarettes, toilet paper, soft beverages, and shampoos: The price of an item was often more expensive when it ended in 9 than when it didn’t.

The practice, also known as psychological, strange, or charm pricing, has been around for so long that no one is certain of its origins. For example, “$9.99 is just below $10” is a just below pricing technique. One theory holds that the introduction of the cash register, which was initially promoted as a tool to deter employees from stealing, resulted in -9 and -99 ending prices because they made it more difficult for the clerk to steal the money they had just received by forcing them to open the register—ding!—and record the sale in order to produce change.

Because he has discovered Macy’s newspaper advertisements from as early as 1880 boasting prices like $.99 and $1.99 and proclaiming they are “positively the best bargains ever offered, and cannot be equaled by any other house,” Robert Schindler, a marketing professor at the Rutgers School of Business-Camden, is skeptical of the cash-register theory. He thinks that because 99-cent pricing has been prominently featured in sales promotions for many years, customers have come to identify it with good discounts.

Consumers strongly identify prices ending in.99 with being low, however Mr. Schindler hypothesized the existence of a “99-meaning conundrum” 15 years ago. He argued that this association cannot be the result of a correlation between the 99-ending and low prices because there is no such correlation.

However, given that customers are aware that $9.99 is essentially equivalent to $10 by this point, why do retailers, who have given their pricing strategy careful consideration, continue to employ it?

There are two reasons why 9-ending pricing continue to function. The first is just the common notion that people read prices from left to right, which could lead them to mistakenly think that $9.99 is $9 or something, and who wouldn’t prefer to pay $9 than $10?

The second is that customers typically associate things with sales or good deals when the price is in the nines. They fail to recognize that $3.99 isn’t significantly cheaper than $4, which it isn’t. People frequently purchase a large number of products at once and frequently forget the prices they usually pay. It is exhausting to go through the grocery store’s aisles trying to recall how much milk, bacon, sausage, nutmeg, cinnamon, and vanilla cost the last time you bought them.

As a general guideline, you can tell if a pricing is better than usual by looking for a 99.

The reasons behind shops’ adoption of 9-ending prices were revealed in a different research by Professors Levy and Snir, Alex Gotler of Israel’s Open University, and Haipeng Allen Chen of the University of Kentucky.

It is basically this: Stores strongly prefer charm prices to lessen the shock when raising prices. The grocery store may have tags that read “SALE: 2 for $7.00” or “SALE: $8.50″ and are written in bold red letters to draw attention to the sale when prices are reduced. Usual price $8.99,” which is independent of 9-endings, or lowering it to the next significant price barrier.

Mr. Levy remarked, “When I raise the price, I make them 9 ending. “We don’t want price rises to be obvious to customers. The merchant wants customers to believe the pricing is still reasonable.

The same impact was observed in a companion study conducted in Israeli supermarkets, indicating that is not solely a peculiarity of American businesses. Outside of grocery stores, 9-endings are also very common. In other research, Mr. Levy has thoroughly examined charm pricing in a database of prices for goods like CDs, videogames, DVD players, digital cameras, laptops, and more.

Prices often remain where they are once they reach a significant 9-threshold. Even more difficult to negotiate and less likely to be good deals are prices that end in $.99, $9.99, or $99.99. It is obvious why. What are the chances that $399.99 would be the lowest price at which someone could sell you a given size TV and still make a profit? When you consider it, it becomes clear that $399.99 is likely marked up from the lowest price that the market could provide.

“The majority of us view 9 as a good deal. The precise reverse is true, according to Mr. Levy.