Q. Why is it that gasoline (and many other fuels, I think) are priced with a dollar and cents amount, plus 9/10ths of a cent. I know this practice has been around almost forever, but when and why did it start? Who do they think they are fooling?A. The reason those who tax use the .9 pricing is the same reason those who sell do: So it looks like a better deal, says Tom O'Guinn, executive director of the Center for Brand and Product Management.
It has been demonstrated many times that consumers tend to pay less attention to the right-most digits in a price, O'Guinn says, thus making $1.99 seems like a much better deal than $2.00. Because consumers don't give the .99 as much attention as the number that precedes it, those right-most digits go to the highest point. Government uses the same "trick" as retailers, he says.
A second reason is that over the decades, retailers have brought more attention to .99 pricing, things such as sale signs, "low price," "special pricing," etc. Over time, consumers have noticed and at some level associate .99 pricing with a good deal.
Although less clear, O'Guinn says, it may also have to do with how the mind makes systematic errors in judgment based on how categorical information is remembered and processed: $1.99 belongs in the "1" category and $2.00 belongs in the "2."
O'Guinn concludes that retailers and governments certainly know who they're fooling, because "we consumers are well trained" to take the bait.
-- Produced in cooperation with University Communications
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