Historical data about 9 ending prices
Historically, the tactic of ,99 pricing was adopted by store owners who did not trust their employees (McCarthy & Perreault, 1993) and wanted to diminish this distrust (as cited in Schindler & Kirby, 1997). At that time, customers used to pay with round amounts, so the specific way of pricing would force the employees to open the cash register and give change (Hower, 1943), therefore reducing the probability of stealing the payment (as cited in Schindler & Kirby, 1997).
Motives and 9 ending prices
Buying behavior is not a simple procedure, but a multilateral calculation which contains emotions, cognitive schemes and motives, besides numbers. So, when the consumer is slightly motivated to process the whole price which ends in 9, the latter can be underestimated (Bizer & Schindler, 2005). But besides buying behavior, the product category also affects this underestimation. Products that are utilitarian (like ear buds, toothpicks and napkins) and do not draw attention on their brand or price, usually have low consumer involvement, and in turn, their value is underestimated.
Guilt and 9 ending prices
Consumers often tend to base their purchases on their emotional state. For example, when someone buys a product that is clearly hedonic, but does not need it, he/she feels guilt. So, prices with a 9 ending are considered to be a good “deal/bargain”, which reduces the feeling of guilt (“I may not need it, but I got it in a low price”) and increases hedonic consumption (Choi, Li, Rangan, Chatterjee, & Singh, 2014). Therefore, consumers are able to justify the purchase of a directly non-useful product by arguing that they did not pay full price (Choi et al., 2014).
It would be necessary to clarify that this effect is only useful if the consumers long to tranquilize their monetary guilt, but in cases that concern their health, the guilt and buying behavior are not influenced by prices ending at 9.
Demographics affected by 9 ending prices
As mentioned in Gaston (2011), consumers that tend to be affected by ,99 pricing are usually young consumers who are more meticulous with product prices, but also consumers with low educational level and low income.
Conclusion about 9 ending prices
According to the aforementioned, the tactic of 9 pricing demonstrates the complexity of our buying behavior and perception. Prices are not just numbers in our brains, but a whole subsystem of cognitive schemes and emotions. What do you think about the information shared in this article? Feel free to share your opinion!
Christos Panousis
Researcher και writer for Nudge Unit Greece
~Explaining Behavioral Economics Simply~
References
Gaston, B. C. (2011). Consumer Preferences for 99-ending prices: The mediating role of price consciousness”. Working Paper, Universidad Carlos III de Madrid.