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Sometimes items are priced at 5 cents less than a dollar, e.g., $49.95. I wonder why? Does that give shoppers a subconscious urge to consider it $40-something where $49.99 would not? Otherwise, why do vendors forgo the extra four cents?
 
Sometimes items are priced at 5 cents less than a dollar, e.g., $49.95. I wonder why? Does that give shoppers a subconscious urge to consider it $40-something where $49.99 would not? Otherwise, why do vendors forgo the extra four cents?
Exactly as you say. It's very well known, but even people who know it still fall for it.

£14.99 triggers the £14 bit and hence makes it seem a lot cheaper than if it was priced at £15. This is why I round up and say (aloud or just in my head to myself) that it costs £15.
 
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Sometimes items are priced at 5 cents less than a dollar, e.g., $49.95. I wonder why? Does that give shoppers a subconscious urge to consider it $40-something where $49.99 would not? Otherwise, why do vendors forgo the extra four cents?
For example at Costco, $.97 means the last manager's discount or clearance. Basically if you were holding out on buying an item and saw this price, it is almost guaranteed 1) it is never going to be restocked 2) lowest price you can get at this store 3) time to buy now if you wanted it.
 
Sometimes items are priced at 5 cents less than a dollar, e.g., $49.95. I wonder why? Does that give shoppers a subconscious urge to consider it $40-something where $49.99 would not? Otherwise, why do vendors forgo the extra four cents?

Exactly as you say. It's very well known, but even people who know it still fall for it.

£14.99 triggers the £14 bit and hence makes it seem a lot cheaper than if it was priced at £15. This is why I round up and say (aloud or just in my head to myself) that it costs £15.

For example at Costco, $.97 means the last manager's discount or clearance. Basically if you were holding out on buying an item and saw this price, it is almost guaranteed 1) it is never going to be restocked 2) lowest price you can get at this store 3) time to buy now if you wanted it.
While I suspect that there may well be some truth to the psychological explanation (namely, that - subconsciously) one may read the price as cheaper than it actually is, a senior member of the staff of a venerable store (one of those affluent places that was more than a century old at that point) explained to me (when I had made exactly this argument to him) - a quarter of a century ago (when cash still ruled) that the main reason for this practice is actually to ensure that the customer can see the till being opened, the cash placed therein, and registered, and a minimal amount of change returned to the purchaser, thereby ensuring that an exchange and transaction has taken place, and has been witnessed by the purchaser as having taken place.

In other words, such numbers ensure that the till must be opened, the cash placed within, (rather than surreptitiously pocketed), the purchase thus registered - this opening of the till is proof of purchase - the (least amount of) change returned to the customer and that this exchange, or transaction, has been witnessed.
 
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I'm sure that was one reason, or the sole original reason (I also heard this) but nowadays with most payments being made by card, and/or with receipts usually given out or swiped against loyalty cards, the reason is most likely to be marketing.

It's called "charm pricing". Apparently, as customers (i.e. us!) read numbers left to right, £14.99 is subconsciously thought to be closer to £14 than £15. We're so manipulable*.

* I had to type that into google as I was sure I'd just invented a word. Apparently I'm not that smart, and someone beat me to it 😁
 
Agreed! I just got a comment on a Facebook post that was very genuinely nice but it made me cringe just because of all the slang, it was quite ridiculous.
 
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Sometimes items are priced at 5 cents less than a dollar, e.g., $49.95. I wonder why? Does that give shoppers a subconscious urge to consider it $40-something where $49.99 would not? Otherwise, why do vendors forgo the extra four cents?

Blame Walmart for this; in particular, Sam Walton, and upending the entire concept of product distribution.

Back in them old days, There was the following means for shipping a product to a store for sale (used by the likes of Sears, JC Penney, Brandeis, KMart, Macy's, Nordstrom, Bloomingdales, Montgomery Ward, etc.):

  1. a company creates a product that costs $5 to create.
  2. That product gets sent to from the factory to the national warehouse, via (insert transportation company here).
  3. Product gets sent from the national warehouse to a regional distributor (again, insert transport company here).
  4. Product gets sent from the regional distributor to a local distributor (again, insert transport company here).
  5. Product gets sent from the local distributor to the store (again, insert transport company here).
  6. Product gets put out on display for sale.
Each time the product moves from one place to another in that production chain, the store selling the product takes a hit, as each step takes their pay from that step in the distribution chain, causing the store selling it to have to mark up the cost that product, causing that $5 product to now become $24.99.

Enter Walton. Walton sees a way to make money from that, so instead of using steps 3-5 in the chain, he:

  1. buys his own trucks, to save the money that would be paid out to the various transportation companies to transport that product,
  2. creates his own distribution network: Sam Walton Distribution Centers, to eliminate the need for the regional and local distributors and again saving the money that would be paid out to those distributors. That way, he ships from himself to himself, and eliminates that part of the markup.
  3. Ships from his own warehouses to his own stores, and saves the money from the transport of the product there.
  4. The store sells the product for $24.94 or some weird non-even price, to give the consumer the (mis)perception that they are buying the product for a cheaper price than those companies that are using the old model.
  5. Sam Walton pockets all of the savings, and makes more money than the stores using the old model
Using this model, Walton was able to get more customers into his stores by making them think they are buying the product cheaper for what they could get elsewhere, and as such, pulled those customers away from those stores, causing most of them to go out of business. Sears? Gone. Montgomery Ward? gone. JR Brandeis? Gone. Younker's? Gone. Kmart? gone (at least in the US). Toys-r-Us? Gone (at least in the US).

So yes, that $.04 to $.06 difference does psychologically make a difference in the eyes of the typical consumer; however, they don't realize how duped they have been with who is actually saving the money, and where that savings goes.

BL.
 
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