Amidst the novel coronavirus outbreak, the United States economy has entered a drastic recession as millions file for unemployment, and businesses go bankrupt. With proper social distancing measures in effect, one industry that continues to flourish is online shopping.
Through the Internet, people have access to a wide variety of purchasable products and increasing numbers of companies are working to make their products more accessible online. Companies like Amazon and eBay provide shipment of packages to people’s homes. Doordash, UberEats, and Seamless allow contactless food delivery. Netflix and Youtube have been flooded with more at-home users.
The Importance of $.99 Pricing
With all this in mind, we see the relevance of money and market pricing regardless of the economic situation. And we’re sure that, in this new digitally-focused market, you’ve seen lots of products with a price tag ending in $.99. Businesses are utilizing sales and purposeful pricing to help keep the market going. More specifically, it is actually been a common marketing strategy for a long time to set prices with a $.99 ending.
A Penny on the Brain
By setting the price at $.99, companies increase their sales through strategic, psychological effects. For example, setting the price of a tablet at $99.99 means the item is essentially $100. Nevertheless, when a person views this price label, there is a psychological interpretation of the tablet’s price as a bargain. It’s worth more than the negligibly lower price.
The leftmost digit has the largest resonance with a potential customer and though they might know the price is basically $100, there are subconscious associations with a lower price in the $90 range.
Studies and interviews across several companies and universities indicate this ending-in-9 marketing strategy increases sales by a significant number. Accounting for this left-digit perception mentioned in #1, one cent and this change in pricing can make a huge difference and several companies have learned to take advantage of this to increase sales.
Setting a price at 99 cents, or with a 9 at the end, makes it more difficult for a customer to pay the exact amount in cash. This then forces the cashier to open the cash register and record the interaction in a manner that prevents theft from the store.
While the exact origin of the ’99 concept’ is unknown, there are several instances where this marketing strategy began to emerge in history. The NY Times cites one particular example from the Museum of American Heritage. In 1879, there was a Dayton bar owner who allowed merchants to steal from clerks with just a price change.
He set prices at a penny less than the full dollar amount which caused cashiers to open cash registers to return change to a customer. When the cash register was open and the cashier was vulnerable, these merchants could seize the cash and steal the money.
In 1880, there was another important instance of 99 cent marketing in the form of a newspaper advertisement. Rowland H. Macy was selling 100 pieces of “reliable black silk” for a special amount, 99 cents. This was the very first recorded mention of 99 cent marketing in a newspaper.
The largest usage of this number was established by the highly influential Dave Gold. In the 1960s, he and his wife sold wine at a liquor store in Los Angeles, California. The prices which they used included 79 cents, 89 cents, 99 cents, and $1.49.
Gold further described, “Whenever I’d put wine or cheese on sale for $1.02 or 98 cents, it never sold out. When I put a 99 cent sign on anything, it was gone in no time.” Gold went on to make a fascinating realization that 99 was “a magic number.” With this marketing strategy, Gold realized a larger increase in sales and took this to the next level.
In 1982, Dave Gold and his wife established the first company to officially market this 99 cent system of pricing. They started a chain of 99 Cents Only stores which went public in 1996. Even in present-day, the Gold company still strikes it rich with 282 stores and a net worth of over 500 million dollars. Sales continue to rise, as profits rise by even more.