Ending prices with “.99” can backfire on sellers

It makes consumers less likely to choose pricey upgrades

Setting a price just below a round number ($39.99 instead of $40) may lead consumers into thinking a product is less expensive than it really is – but it can sometimes backfire on sellers, a new study shows.

Researchers found that this “just-below” pricing makes consumers less likely to upgrade to a more expensive version of the product or service, such as a bigger size or higher-end trim on a car. The just-below price that makes a product itself seem like a good bargain also makes the leap to the premium product seem too expensive, said Junha Kim, lead author of the study and doctoral student in marketing at The Ohio State University’s Fisher College of Business.

“Going from $19.99 to $25 may seem like it will cost more than going from $20 to $26, even though it is actually less,” Kim said. “Crossing that round number threshold makes a big difference for consumers.” Kim conducted the study with Joseph Goodman and Selin Malkoc, both associate professors of marketing at Ohio State. Their research was published yesterday (Aug. 26, 2021) in the Journal of Consumer Research.