There's this urban legend that companies price things as £9.99 to trick people into thinking that they are £9.
Big retailers do an awful lot of research about this, not just practical (what works) but psychological (why.)
When I was a senior manager at one of Europe's biggest retailers, I had a briefing about this. (I was in IT, not Store Operations.)
The "£9.99 makes people think it's £9" thing is an urban legend that seems to have been invented by people OUTSIDE the industry who speculated on why we price this way.
It's more subtle than that.
Pricing at a non-round number has one measurable effect. It reduces complaints about "why don't you price it lower" by ENOUGH to outweighs the extra hassle of keeping small change, AND the decrease in margin.
If you price at £10, a surprising number of people think "this should be £8.50, you're rounding up the price."
If you price at £9.99, everyone thinks "that's £10", but it seems to stop them speculating on how much lower a non-rounded price would be!
Big retailers do an awful lot of research about this, not just practical (what works) but psychological (why.)
When I was a senior manager at one of Europe's biggest retailers, I had a briefing about this. (I was in IT, not Store Operations.)
The "£9.99 makes people think it's £9" thing is an urban legend that seems to have been invented by people OUTSIDE the industry who speculated on why we price this way.
It's more subtle than that.
Pricing at a non-round number has one measurable effect. It reduces complaints about "why don't you price it lower" by ENOUGH to outweighs the extra hassle of keeping small change, AND the decrease in margin.
If you price at £10, a surprising number of people think "this should be £8.50, you're rounding up the price."
If you price at £9.99, everyone thinks "that's £10", but it seems to stop them speculating on how much lower a non-rounded price would be!
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