Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How Nine-Ending Prices Shift Your Perception of Value
Transcript
- Lucas: So, Luna, have you ever noticed how almost everything at a grocery store ends in 9? $4.99, $9.99, $14.99 — it's almost impossible to find a round number. Luna: Yeah, and I've always assumed it's because $4.99 feels like $4, not $5. But is that actually true? Does that one cent really change our behavior? Lucas: It does, and the effect is surprisingly large. There's a famous study from the University of Chicago and MIT that looked at a women's clothing catalog. They tested three prices for the same dress: $34, $39, and $44. Luna: And which one sold best? Lucas: The $39 dress outsold the $34 dress — even though it was $5 more expensive. The nine-ending actually increased demand by about a third compared to the $34 price. And the $44 dress sold the least. Luna: Wait — so people preferred paying $39 over $34? That seems irrational. But I guess that's the point. Lucas: Exactly. The theory is called the 'left-digit effect.' We read prices left to right, and our brain anchors on the first digit. So $39 feels like it's in the thirties, while $34 is also in the thirties — but $39 somehow signals a better value relative to $44? It's weird. Luna: Right, because $39 is just one dollar away from $40, but our brain treats it like it's in a different category. Lucas: Precisely. And this effect is strongest when there's a change in the tens digit. Going from $20.00 to $19.99 is a huge psychological drop because the first digit goes from 2 to 1. But going from $19.99 to $19.98? Negligible. Luna: So retailers know this. I mean, it's been around forever. But is there any case where it backfires? Like, where a round number actually works better? Lucas: Yeah, definitely. Luxury brands often avoid nine-endings. If you're selling a $5,000 handbag, pricing it at $4,999 feels cheap — it signals discount or bargain. A round number, like $5,000, feels more premium and confident. Luna: That makes sense. So it's about context. For everyday items, nine-endings signal a deal. For luxury, they signal desperation. Lucas: Right. And there's also a study from a gas station chain that tested nine-ending versus round-number prices. They found that nine-endings increased volume by 15 to 25 percent for regular gas, but for premium, the effect was smaller because premium buyers are less price-sensitive. Luna: Huh. So the same tactic doesn't work across all customer segments. Lucas: Exactly. And here's another twist: some stores use nine-endings to signal that a price has been reduced. If a product normally costs $50 and it's marked at $49.99, it feels like a sale. But if it's always $49.99, it loses that effect. Luna: So you have to change the price periodically to keep the perception of a discount. Lucas: Yeah, or use nine-endings selectively. I think a lot of marketers overuse nine-endings and dilute their power. The best approach is to test. Luna: Which brings me to something I've been meaning to say. You know, these kinds of insights are exactly why I love this show. It actually gives you something you can use. Lucas: I'm glad to hear that. And it's also why the show stays ad-free — so we can focus on the substance without interruption. If you've found value in episodes like this, the way to keep that going is listener support. Luna: Yeah, it's a small way to say 'this matters to me.' And it really helps us keep doing what we do. Lucas: If you're inclined, you can head to buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure at all — but it genuinely makes a difference. Luna: Alright, back to nine-endings. So we've talked about retail and gas stations. What about restaurants? I see a lot of menus with $9.99, $14.99. Lucas: Restaurants are interesting. Some high-end places use round numbers to signal quality. But fast-casual chains often use nine-endings. There's a study of a deli chain that changed its prices from round numbers to nine-endings and saw a 7 percent increase in sales — just from that one digit change. Luna: Seven percent is huge for a tiny operational change. But I wonder — does it affect customer satisfaction? Like, do people feel tricked if they notice? Lucas: That's a good question. Most consumers know about nine-endings on some level, but it still works subconsciously. It's not seen as deceptive — it's just standard practice. The risk is if you're the only store in a category using round numbers, you might seem more expensive. Luna: So it's almost a competitive necessity in some industries. Lucas: Exactly. If everyone else is using $19.99 and you're at $20, you'll seem pricier even though the difference is a cent. That's the anchoring effect in action — the market's standard price becomes the reference point. Luna: Alright, so for our listeners who are marketers or business owners — what's the actionable takeaway? Lucas: First, if you're selling to price-sensitive customers at a mid-to-low price point, definitely test nine-endings. Start with your best-seller. Second, for premium products, consider round numbers. Third, don't leave the price at $X.99 forever — change it occasionally to reinforce the deal perception. Luna: And test, test, test. Because what works for one audience might not work for another. Lucas: Right. There's no universal rule — but the left-digit effect is one of the most robust findings in behavioral economics. It's worth taking seriously. Luna: I'll definitely think twice the next time I see $9.99 versus $10. Lucas: Yeah, and maybe you'll even catch yourself feeling that difference. Thanks for the great conversation, Luna. Luna: Same here, Lucas. See you next time.