The $.99 price ending remains a highly effective psychological pricing strategy, making products appear more affordable than they truly are. Retailers are actively working to preserve this pricing tactic, sometimes by redesigning product packaging or reducing marketing expenditures, in response to escalating production and operational costs.
However, the use of $.99 pricing can have unintended consequences. Research indicates that while it makes the primary product seem like a good bargain, it can deter consumers from upgrading to more expensive versions or larger sizes. For instance, in one study, 56% of customers upgraded to a larger coffee cup when the upgrade didn't cross a dollar threshold (e.g., from $1 to $1.25), but only 29% upgraded when the smaller cup was priced at $0.95 and the larger option crossed the $1 mark.
This "just-below" pricing strategy is particularly prevalent when retailers are raising prices. They often opt to increase a price to an amount ending in $.99 (e.g., from $9 to $9.99) to soften the perceived blow of the price hike. Conversely, when lowering prices, retailers are less bound by the $.99 ending, often using plain round numbers or other sale promotions (e.g., two for $18 or $8.50 instead of $8.99 for a sale item).
The enduring power of the $.99 price point, which has been analyzed for decades, is a testament to its psychological impact on consumer purchasing decisions. Companies prioritize maintaining this price structure due to its strong influence on perceived value and affordability, despite potential drawbacks for upselling higher-priced items.
