Charm Pricing – 99c Really Works

Today we’re looking at a pricing strategy that’s as old as it is effective – charm pricing.

You know the drill: $2.99 instead of $3.00, or $49 instead of $50. But why does that one cent or one dollar seem to make such a big difference?

It’s not just about saving that penny; we instantly judge the number as much smaller than it really is.

MUCH smaller, to the point our subconscious brain thinks that $9.99 is closer to $9.00 than it is to $10.00 – because we read left to right and we see “$9…” and that’s our first impression.

First impressions count, and after all, we don’t care about the pennies or cents, we care about the pounds, euros or dollars, right?

Also of course, in that $9.99 example the dollar amount goes from the double digit of 10, down to the single-digit number 9. Bargain!

The point is, that 10 dollar note ends up moving from your purse or wallet to theirs, and getting a dollar or penny back each time doesn’t help your budget much.

It’s Not Always 1 Cent

We see the same thing with $9.95 or $9.70, as the seller makes the “charm” pricing a bit less obvious to your conscious mind.

Here’s another classic and sneaky example of how we see the big numbers and miss the bigger picture; see how the seller has literally made the 3 dollars big, the 70 cents tiny:

But she doesn’t really need to, our brains do that for her!

Let’s explore the origins of this tactic and how, despite living in the digital age, we’re still charmed by charm pricing…

The Honest Shopkeeper’s Assistant

Charm pricing wasn’t always a sneaky psychological ploy; it started as a practical solution.

Back in the day, to ensure that every sale was recorded, shopkeepers set prices a penny lower. This clever trick meant that shop assistants had to open the till to give change, leaving a record of the sale and preventing them from pocketing the cash. It was a simple yet effective way to prevent theft.

From a Virtue to Sneaky Strategy

What began as a measure to keep everyone honest quietly morphed into a powerful and sneaky sales tactic!

Sellers noticed that items priced with .99 sold better than their round-numbered counterparts. It wasn’t long before this pricing strategy spread like wildfire to everything, from essential groceries to fashionable shoes.

The charm of that final cent has proven irresistible to both buyers and sellers ever since!

The Left-Digit Effect and Big Ticket Buys

The left-digit effect scales up to those larger purchases too. That little difference, even in the thousands, can still sway our perception of value and affordability. A car priced at $48,900 seems more attractive than one at $49,000, showcasing the psychological pull of those first digits, even when it’s costing you $900…

But now look again… $48,900 is basically $49,000, which is basically $50,000, so that’s actually a double-charmed price!

The Round Number Rebels? Not Really…

But wait, I hear you say, some retailers offer nice, round, soft and comfy numbers, like $30 or $500? Is that because they’re too daft to use the undeniable power of charm pricing? They just don’t know about it?

Nope, we all know about it, I do, you do and so do they!

It’s because they know they’re selling an emotional product! Purely emotional or luxury products are often priced with round numbers, in a very deliberate reversal of the usual charm pricing.

It can also work with physically soft products, such as a bath towels, a cuddly toy and so on.

Suppose for example you were in an art gallery, considering an oil painting, done by hand. $200 may seem a fair and reasonable price for that particular picture, and indeed any kind of handmade items, such as handmade soaps or candles, will tend to sell better with round-number pricing.

In contrast, $199.99 for that same painting would feel a bit… off? Like some kind of bargain basement deal they’re trying to get rid of! Same with a hand-made scented candle for $12 seems fine, but $11.99 seems tacky.

Alan’s Advice (The Cent-Sational Bottom Line):

One of the more amusing aspects of charm pricing is how you still hand over the same amount of dollars (or euros etc).

Suppose you buy something for $4.90; you still hand over a five dollar note. You buy something for $19.70, you still give the shop assistant a twenty!

In a world where digital transactions are becoming the norm offline as well as on, the physical act of handing over banknotes has almost entirely gone. That means we no longer have that little poke of a reality check! So make the effort to really think about how much you’re handing over, before you click that mouse or hand over your card.

And there you have it – my 2 cents into that priceless little trick of charm pricing.

The real trick or takeaway here isn’t just to be aware, you already were aware. it’s to be aware that even when you know all about it, charm pricing still works on you!

So don’t just know about, act on that your knowledge. Stay sharp!