Comments on: $19.95 Pricing Explained

By: John

John — Fri, 02 May 2008 07:12:29 +0000

Everyone looks into this improperly. The truth is that things are priced this way (at least in the beginning) in order to actually make an extra profit. Most Merchants priced the merchant fees based on dollar amount. For example, if a purchase was 20 dollars, the merchant fee for processing the card might be 7 cents when a purchase between 10 to 19.99 would be 4 cents. therefore the profit on a 20 dollar item would be actually be more if they lowered the price a cent or two. Many merchants fees vary and is why we always see 19.95, 19.98, 19.99, etcetera on particular objects. You will also notice that these are persistent based on the store you are in. For example, most of Wal-mart’s items are 19.95 but Walgreen’s would be 19.98 for most items. It usually depends on the merchant being used. This is how it started because merchants started out charging based on the purchase between a particular rounded dollar amount. They hardly do that anymore. These days the pricing is often due to one of two main reasons.

1. Because alot of people will lay down a twenty and say keep the change (which adds up over time).

2. And because Everyone else is doing it.

By: donna jean

donna jean — Thu, 01 May 2008 21:48:18 +0000

You brought up a point I hadn’t considered – the perception of the wholesale price. Since I make items for sale, I’m constantly having to figure out a price. I really like whole numbers, but that seems to make things difficult. I wonder if it also influences the perception of the ‘cost’ value of the item as well.

By: Michael Good

Michael Good — Thu, 01 May 2008 00:46:37 +0000

It works because, the more detail, the less likely you are to question the item’s cost.

By: Jim

Jim — Wed, 30 Apr 2008 23:31:11 +0000

Your theory about the Walmart pricing at unusual numbers is interesting. It probably does have a psychological impact on shoppers.

@Tom: “they are able offer lower prices than every other retailer all the time.”, I am sure Walmart loves it when we believe this and they spend lots of marketing dollars telling us they have low prices. But they do not beat every retailer all the time. They may be cheaper on average and/or may be cheaper on most items, but they dont’ beat everyone ALL the time. Heres one report with examples where several items were cheaper at Target than Walmart:
http://www.cockeyed.com/citizen/target/walmart_versus_target01.html

Jim

By: jim

jim — Wed, 30 Apr 2008 20:40:07 +0000

JimmyDaGeek: I’ve heard the same thing, something to the effect of a price ending in 7 was the absolute lowest price Target would discount something (I probably have both the number and the store wrong, but you get the idea) so snatch it up if you see it.

Tom: I think there’s a little of both, they can do that because they have pushed margins to the point that it’s still profitable.

By: Tom

Tom — Wed, 30 Apr 2008 20:14:12 +0000

This will be slightly off topic…

I think in a way that you’re right about Wal-Mart, however, they don’t just do that to woo shoppers at the expense of their profit margins. Other stores try the same thing, but often lose potential profit. Wal-Mart has cut costs and leaned out their supply chain so much that they are able offer lower prices than every other retailer all the time.

I have great respect for Wal-Mart (minus all the bad press) and their ability to offer such low prices. $.25 off milk at any given time is not much, but $.25 each time over the course of a lifetime is thousands. Why do you think that Wal-Mart is posting huge profits even in this “recession”?

By: JimmyDaGeek

JimmyDaGeek — Wed, 30 Apr 2008 19:36:46 +0000

A standard retail practice is to “code” merchandise with different cents values. This is a way for clerks to verify a valid price. For example, .97 might be a clearance price while .99 might be a sale price.

I remember seeing gas stations price their gas using a fraction like .6 instead of .9, but I don’t think anyone noticed, so they stopped it.

By: Traciatim

Traciatim — Wed, 30 Apr 2008 18:41:07 +0000

I find it very unfortunate that this is studied that much. If products were actually good and priced properly they would sell. How do you get your toothpaste in to the mouths of millions . . . not by having good toothpastes, but by tricking them.

I think I’m heading the way of the crazy old hermit on the hill who hates society. The more and more I read the more and more I just want the earth to stop so I can get off.