Price ending

From Wikipedia, the free encyclopedia

It has been suggested that this article or section be merged into Psychological pricing. (Discuss)

Price ending, or more commonly psychological pricing, is the practice whereby advertised prices are consistently just below round numbers; for example, such prices might end in a sequence of nines. The price is often equivalent to a round number minus the value of the smallest coin: typically ending .99, .95, .90 or occasionally .50. In the UK, before the withdrawal of the half penny coin in 1984, prices often ended in 99½.

A number of explanations have been advanced for this practice:

It fools the customer into thinking that the price is lower than it is. This is especially the case when the rounded-up price has an extra digit (e.g. 9.99 → 10.00). One controlled study suggested that this increased sales by 8%.
When items are listed in a way that is segregated into price bands (such as an online real estate search), price ending is used to keep an item in a lower band, to be seen by more potential purchasers.
When prices are quoted after tax, it is a way to reduce employee theft by forcing them to make change, hence ringing up a sale in order to open the till.
When prices are quoted after tax, the total gives a simple checksum of the number of items purchased.
When prices are quoted after tax, some customers may not wish to wait for their change, and this will produce a small increase in tax free profits.
When prices are quoted before tax, the rounding algorithm may slightly reduce the amount of tax payable.