psychology - Is there any advantage in marketing my product for £99.99 instead of £100?

It's a wide-spread marketing technique that seems to have been around forever- selling products for £1.99, £9.99, £19.99, instead of £2, £10 and £20.

Presumably the pyschology is that submliminally £99.99 seems disproportionately closer to £99 (or £90) than £100 does.

But surely the technique is so utterly transparent and consumers so wary of marketing techniques nowadays that it is completely ineffective. And worse, by doing it, you risk detering potential customers by coming across as deceptive or dishonest.

Answer

The psychology behind the $99 was explored in depth in Priceless: The Hidden Psychology of Value, which if you ask for my humble opinion, is a life-changing book.

A price such as $99, or $14.95 are known as charm price. Research suggests that the most effective charm price is that ending with 9. A University of Chicago/MIT research (Eric Anderson, Duncan Simester) with a mail order company yielded most sales when an item was priced $39 (despite $34 being cheaper!):

• $34


• $39


• $44

The obvious reason for the success of charm prices is mental rounding ($99 is in the 90s while $100 is in the 100s). But both strong proof to people's ability to grasp magnitude and the fact that more people bought the $39 product than the $34 one suggest that the mental rounding assumption is very partial, if not neglectable.

An alternative theory is that charm prices are seen by people as sale prices or a bargain (which does not suit all businesses, like luxury merchants; also such price can also be linked to hard-sale).

But studies into consumer choice and trade-off contrast seem to provide the most solid explanation, albeit a surprising one:

When there are many hard-to-evaluate options, attention wanders. It is drawn to easy comparisons, to options that are clearly superior to another, even if the difference is slight. The imagined round-number price becomes a foil for the 99-pence price, bathing it in an unaccountably alluring glow. (Priceless: The Hidden Psychology of Value, William Poundstone).

In other words, we see these prices as attractive because the brain finds it easy to see how they are cheaper from the round-number price.