Reduce the Left Digit By One

Should you charge just-below prices, like $9.99 or $19.95?

These prices are everywhere. Sometimes even in calories (e.g., 199 calories; Choi et al., 2019).

Does this strategy work?

It does, based on a meta-analysis with 40k participants (Troll et al., 2023).

Why It Works

• Anchoring on Left Digit. A one-cent difference between $2.99 and $3.00 can feel like a one-dollar difference because your eyes get anchored on the 2: "while evaluating '2.99,' the magnitude encoding process starts as soon as our eyes encounter the digit '2.' Consequently, the encoded magnitude of $2.99 gets anchored on the leftmost digit (i.e., $2) and becomes significantly lower than the encoded magnitude of $3.00" (Thomas & Morwitz, 2005, p. 55).
• Budget Tallies. Researchers asked people to buy products under a $73 budget. Participants believed they could buy significantly more items with just-below prices because they kept tallying the first digits instead of the rounded price (Bizer & Schindler, 2005).

Stronger For

• Small Left Digits. $199 is more effective than $799. Moving from 1 to 2 is a 100% increase, while moving from 7 to 8 is only a 14% increase (Lin & Wang, 2017).
• Visible Prices. Customers need to see the anchor. Effects diminish if $199 is heard or recalled (Sokolova et al., 2020).
• New Brands. Without familiarity, customers assume that $199 is discounted (Anderson & Simester, 2003).
• Young and Affluent. Or anyone who is price-conscious and deciding quickly (Gaston-Breton, 2011).

Caveats

• Just-Below Prices Aren't Actually Lower. Ironically, just below prices are typically higher than average — based on 8 years of scanner data and 98 million transactions (Snir & Levy, 2021).
• Inferior Quality. You probably don't want to charge $19,999 for a medical procedure. Though a large meta-analysis couldn't find any degradations in quality from just-below prices (Troll et al., 2023). Another study found that customers have gradually stopped using price to infer quality across the years from 1989 to 2006 (Völckner & Hofmann, 2007).
• Depends on Math Skills. Customers who are skilled with numbers encode $2.99 as $3.00.

...if the average WTP was determined to be around 18 dollars, less numerate consumers would respond most favorably to $18.99, while highly numerate consumers would respond most favorably to $17.99 (Hodges & Chen, 2022)

• Anderson, E. T., & Simester, D. I. (2003). Effects of $9 price endings on retail sales: Evidence from field experiments. Quantitative marketing and Economics, 1, 93-110.
• Bizer, G. Y., & Schindler, R. M. (2005). Direct evidence of ending‐digit drop‐off in price information processing. Psychology & Marketing, 22(10), 771-783.
• Choi, J., Jessica Li, Y., & Samper, A. (2019). The influence of health motivation and calorie ending on preferences for indulgent foods. Journal of Consumer Research, 46(3), 606-619.
• Gaston-Breton, C. (2011). Consumer Preferences for 99-ending prices: the mediating role of price consciousness. In Business Economic Series (Vol. 3, pp. 1-39).
• Hodges, B. T., & Chen, H. (2022). In the eye of the beholder: The interplay of numeracy and fluency in consumer response to 99-Ending prices. Journal of Consumer Research, 48(6), 1050-1072.
• Lin, C. H., & Wang, J. W. (2017). Distortion of price discount perceptions through the left-digit effect. Marketing Letters, 28, 99-112.
• Manning, K. C., & Sprott, D. E. (2009). Price endings, left-digit effects, and choice. Journal of Consumer Research, 36(2), 328-335.
• Schindler, R. M., & Chandrashekaran, R. (2004). Influence of price endings on price recall: a by‐digit analysis. Journal of Product & Brand Management, 13(7), 514-524.
• Schindler, R. M., & Kirby, P. N. (1997). Patterns of rightmost digits used in advertised prices: implications for nine-ending effects. Journal of Consumer Research, 24(2), 192-201.
• Snir, A., & Levy, D. (2021). If you think 9-ending prices are low, think again. Journal of the Association for Consumer Research, 6(1), 33-47.
• Sokolova, T., Seenivasan, S., & Thomas, M. (2020). The left-digit bias: when and why are consumers penny wise and pound foolish?. Journal of Marketing Research, 57(4), 771-788.
• Thomas, M., & Morwitz, V. (2005). Penny wise and pound foolish: the left-digit effect in price cognition. Journal of Consumer Research, 32(1), 54-64.
• Troll, E. S., Frankenbach, J., Friese, M., & Loschelder, D. D (2023). A meta‐analysis on the effects of just‐below versus round prices. Journal of Consumer Psychology.
• Völckner, F., & Hofmann, J. (2007). The price-perceived quality relationship: A meta-analytic review and assessment of its determinants. Marketing letters, 18, 181-196.