Pricing
Tactic

Reduce the Left Digit By One

Use “charm” prices (e.g., $2.99, $49.95) to reduce the left digit as much as possible.

$2.99

Overview

Your brain encodes prices before you finish reading the numerals. Therefore, a one-cent difference between $2.99 and $3.00 can feel like a one-dollar difference:

...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).

Researchers analyzed 50+ studies on charm prices with a total sample of 40,000 people, and they found that charm prices still work (Troll, Frankenbach, Friese, & Loschelder, 2023).

Some marketers are worried that charm prices could reduced perceived quality, but this effect didn't happen in the meta-analysis. So there's an even stronger case for using them.

  • 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.