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 Why
Do All Prices End in 99?
Psychological pricing or
price ending is a marketing
practice based on the theory
that certain prices have
a psychological impact.
The retail prices are often
expressed as "odd prices":
a little less than a round
number, e.g. $19.99 or $2.98.
The theory is this drives
demand greater than would
be expected if consumers
were perfectly rational.
Psychological pricing is
one cause of price points.
Control Employee
Theft?
Google Answers suggests
that there was another reason.
Intentionally awkward pricing
was adopted primarily to
control employee theft,
before the turn of the 20th
century when stores expanded
beyond owner-operators and
used cash registers. For
cash transactions with an
odd price, most customers
must be given change. Creating
change requires the employee
to open the cash register,
recording the sale. This
reduces the risk of the
cashier stealing from the
store owner?
The Story of the
Dollars + 99 Cents Price
The following is an excerpt
from
http://www.straightdope.com/.
The most elaborate explanation
comes from Scot Morris's
Book of Strange Facts &
Useless Information (1979):
"In 1876, Melville E. Stone
decided that what Chicago
needed was a penny newspaper
to compete with the nickel
papers then on the stands.
However, there was a problem:
with no sales tax, and with
most goods priced for convenience
at even-dollar figures,
there were not many pennies
in general circulation.
Stone understood the consumer
mind, however, and convinced
several Chicago merchants
to drop their prices--slightly.
Impulse buyers, he explained,
would more readily purchase
a $3.00 item if it cost
"only" $2.99. Shopkeepers
who tried the plan found
that it worked, but soon
they faced their own penny
shortage. Undaunted, Stone
journeyed to Philadelphia,
bought several barrels of
pennies from the mint, and
brought them back to the
Windy City. Soon Chicagoans
had pennies to spare and
exchanged them for Stone's
new paper."
Very interesting, maybe
even true (up to a point),
but probably not the reason
prices end in .99 today.
The problem: Melville Stone
ran the Daily News for only
a few months before selling
out in 1876. Judging from
Daily News advertisements,
prices ending in 9 (39 cents,
69 cents, etc.) were rare
until well into the 1880s
and were not all that common
then. The practice did not
really become widespread
until the 1920s, and even
then, prices as often as
not ended in 0.95, not 0.99.
So, what is the real explanation?
It was retail price competition
in the 1880s. Advertising
prices in the newspapers
was rare before 1880 but
common after 1890. At first
prices were usually rounded
off to the nickel, dime,
or dollar, but it wasn't
long before a few smaller
operators looking for an
edge began using what might
be called "just under" pricing
(49 cents, $1.95, and so
on), no doubt in an effort
to convince the gullible
they were getting a bargain.
The idea caught on surprisingly
slowly. Even in the 1920s,
some large merchants still
rounded prices off to the
nearest dollar or on larger
items to the nearest $5
or sawbuck. Today's custom
of having nearly every price
end in 99, 95, or 49 cents
or dollars (or just a 9
for items under $5) is of
fairly recent vintage. The
practice bespeaks a certain
low cunning, but it is also
pretty obvious and trying
to find out who invented
it is like trying to find
out who invented the hat.
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