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Study: Customers Prefer Round Prices

A new study calls into question the seemingly ubiquitous wisdom of prices ending in .49 and .99.
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If your prices end in .49 or .99, it may be time to revise your pricing policies, and switch to whole-dollar amounts. Your customers may thank you, in the form of increased sales.

That is the major takeaway from a study in the Journal of Economic Psychology, in which the authors studied consumer spending habits in settings where the consumer has some discretion about the final price. Those settings included tipping at restaurants; pumping your own gas; and paying-what-you-want downloads for a video game called World of Goo. 

Consider these results: 

  • Of the 65,000 purchasers for World of Goo, a whopping 57 percent chose to pay rounded dollar amounts. (What they paid for the game ranged from one cent to $150.)
  • Of the 9,000 credit card receipts at a restuarant that the authors studied, roughly 73 percent tipped a whole-dollar amount. On bills that did not end in a rounded amount before the tip was added, 25 percent left a tip that brought the final sum to a rounded amount. 
  • Of the 1,301 self-pumped gas purchases, 56 percent were a whole-dollar amount. An additional 7 percent of the totals ended in .01, suggesting that customers had hoped to pay a rounded number, but weren't quick enough to stop the pump in time.

Strategy + Business's Matt Palmquist has a more detailed writeup of the findings. The bottom line, he notes, is that consumers certainly seem to prefer rounded numbers. Managers should take this preference into account when determining their prices.




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