Stores display prices ending in 99, 98 or 95 to make prices appear lower: $9.99 is perceived as “$9 and change,” rather than $10. It’s not the “99″ or “95″ at the end of the price that affects us. It’s that shoppers pay most attention to the left-most numbers in a price; $199 seems a lot better than $200.
Also effective is pricing using seemingly random amounts, say, $328.46. This makes it look like someone carefully set the price so it is as low as possible.
Many companies have taken a cue from casinos’ use of chips by pushing alternative payment methods. For example, using Starbucks’ mobile app to pay for daily $5 lattes feels like you’re not spending real money. Gift cards are another way retailers can make you to spend more. They collect money up front for future purchases and tie gift recipients into buying stuff from them rather than the competition. There’s a decent chance the receiver will lose or forget about the gift card, but the company will still realize a near-100% profit.
Some sellers, especially those with pricey products, advertise discounts as nice round dollar savings (”Save $100″), rather than as a percentage off. The idea is that you’ll more easily absorb the supposed deal. Similarly, some sellers group items for one price (four for $10). You’ll buy four of them, even if you can buy just one for $2.50. We all fall for this.
Want to learn more? Star Tribune readers can view Checkbook’s full list of marketing tactics to be aware of, along with all its ratings of local service providers and consumer advice free until Dec. 5 at Checkbook.org/StarTribune/Shopping. Twin Cities Consumers’ Checkbook magazine and Checkbook.org is a nonprofit organization with a mission to help consumers get the best service and lowest prices. We are supported by consumers and take no money from the service providers we evaluate.