Nine is my favorite number.
And I’m not alone. The number nine is beloved among all of us who are passionate about pricing and consumer psychology.
For example, Spotify subscriptions cost $9.99 per month. TV show downloads on Amazon cost $1.99 for standard definition and $2.99 for high definition. Heck, Steve Jobs launched the iPod and probably saved the entire recorded music industry with a 99-cent price campaign to sell songs from the iTunes store.
No one knows which marketing genius first started shaving off a penny or a dollar from an even price point. But the practice goes back at least to Macy’s ads from 1875. One theory is that odd prices required store clerks to make change, which meant opening the cash register and recording the sale — rather than pocketing the cash.
Sounds plausible. But what we do know for sure is that the practice has stuck. Today, marketing surveys show that 60 percent of all prices end in a 9; 30 percent end in a 5, and only 7 percent end in a 0, which a few prices ending in 4 and 7 sprinkled in.
Rationally, we all know perfectly well that $9.99 is only one penny less than $10.00, and that $999 is only one dollar less than $1,000. But the 9 strikes a chord in our subconscious that makes us react as if it’s a huge difference.
Maybe it’s because we read from left to right. When we look at a price, the first thing we see is the left-most number. And that first number carries such enormous psychological weight that $1.99 feels much lower than $2.01.
One marketing researcher found that if people are given a price of $4.99 and a price of $6, they perceive the difference as $2 instead of the closer $1, which can make a very big difference in sales.
So big, in fact, that a study published in the Journal of Quantitative Marketing and Economics found that changing a price to end in a 9 can increase demand by as much as 35 percent.
And it gets even wackier. The same study found that the number nine is such a powerful sales motivator that clothing priced at $39 sold 24% more than the same clothing priced at $35, even though the price was $4 more expensive.
The only thing more magical than a price ending is 9 is a price ending in 99. Liquor store owner Dave Gold discovered decades ago that bottles of wine priced at $.99 out-sold bottles of the same wine priced at $.89 and even at $.79.
Mr. Gold was so certain of the pricing power of $.99 that he opened a chain of 99 Cent Only stores, which he grew to hundreds of retail outlets and thousands of employees before selling to a private equity company for $1.6 billion.
Prices ending in 99 cents created a fortune for Mr. Gold. And similarly, prices ending in 99 dollars are the mainstay at Apple, the world’s most valuable corporation.
Starting prices for all Apple iMac and MacBook computers end in 99. The company’s flagship iPhone starts at $999, and most of its new watch configurations sell for $399.
Why? Simple. To us silly consumers, a computer priced at $1,299 price feels more like $1,200 than $1,300. A $999 price feels more like $900 than $1,000; and a $399 price feels more like $300 than $400.
The lesson? When it comes to pricing, the best prices end in 9. The very best prices end in 99. If you adjust your prices accordingly, you’ll likely increase both profit margins and sales volumes. Why wait?
Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in helping companies attract more, high-paying customers. He can be reached at email@example.com, or via the company’s website at PeakRevenuePerformance.com.