The Price of a Penny



Usually, I ship out the information one way, but I know a good number of you folks are regularly reading this at this point, so I’d look to do a little informal market research and ask you a question, and that is concerning the old $x.99 saw.

Let me amplify. All of us, all of our life, have been inundated with 99 cents this, 1.99 that, and I’m really wondering if that is an artifice of the past we can relinquish, like fax machines (to large extents) or rotary dial phones. They’ve been around a long time, but are they really necessary? We made a move away from this some time ago, but I’m wondering if we’re really losing sales by pricing something at 3 bones rather than 2.99?

I don’t wander into this territory too often, but it’s something I’ve been noodling over for a good while, and have discussed this at length with cohorts and colleagues, and it’s a sticky wicket, so now I’m turning to you. What do you think?

Even if you normally post responses on FB or Twitter, I’d appreciate you taking the time to respond: do you buy something more readily at $2.99 or $3.00? Inquiring minds want to know.

Until next time, I bid you, dear reader, adieu!

10 Notes on, The Price of a Penny

  1. If I want something, 1 cent will make no difference. The 99 cents thing is silly & I think we as a world should just round up!

  2. Right. I do this stuff on a regular basis. I personally HATE the x.99 paradigm. That being said, market researchers have beaten this to death with the following result:

    x.99 has been measured to sell better than even numbers. x.99 has even been measured to sell better than x.95! Stick with x.99, painful though that might seem.

    There’s some bizarre program in the human brain that makes this work. It’s like watching citizens in an apparently educated republic continue to elect despots, which we know is a common habit.

    Such is life, alas.

  3. And a little side note – let’s say you have a book that is $2.99. If you ask a man how much this book is, he will say “Two dollars.” If you ask a woman how much this book is, she will say “Three dollars.” Just a little observation I’ve made with my family, friends & myself. Pretty much the same answers on all counts.

  4. The penny difference makes no difference to me. Though I have heard the testing on .99 meaning that it sells more often. I suspect that it is not an urban myth.

    My opinion is that people will buy from you at $3 or $2.99 because the product is one that they want. I will just as soon as I get a GM to run Iron Dynasty for me. (I really want to play in ID not run the thing)

  5. The penny would make no difference to me either way. Actually when I see a .99 product I always mentally round it up to the nearest dollar.

  6. I’ve always assumed the reason they do the $2.99 as opposed to $3 thing is because sales tax is done per whole dollar. At $2.99 its taxed at $2 sales tax and $3 sales tax at $3. So if sales tax is 7%, The $2.99 item ends up costing. $3.13 and the $3 item $3.21. So you end up saving more than that one cent if you buy that single item. As for me though, I read $2.99 as $3 anyway, so in my estimation they’re the same when I’m doing my mental calculations.

  7. The Journal of Retailing published quite an interesting paper on this issue a few years back (Schindler, R. M. & Kibarian, T. M. (1996), Increased consumer sales response though use of 99-ending prices).
    Might be worth the read.

  8. I’ve heard that the reason x.99 came about wasn’t about the customer at all, it was to insure that change would have to be given on every purchase, so the till would have to be opened and the sale recorded, and unscrupulous employees couldn’t just pocket the money.

    On the actual topic, it doesn’t make a difference to me personally, but I would agree with the others that you are dealing with a social programming issue. It shouldn’t make a difference, but it probably will.

  9. Thanks all the feedback. I especially like the call out about “social programming”. That seems to sum things up nicely!

    There seems to be quite a myth about the origins of the price point. Interesting.

  10. If I saw two prices $3 and $2.99 I’d pick the $3 as the whole 99 cent thing has always struck me as snaky.

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