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Why things cost $19.95

submitted on April 21, 2009 by MikeG in "Member's Lounge"
Here is an interesting blog post on why we like things that cost $19.95..

University of Florida marketing professors Chris Janiszewski and Dan Uy suspected that something fundamental might be going on, that some characteristic of the opening bid itself might influence the way the brain thinks about value and shapes bidding behavior. In particular, they wanted to see if the precision of the opening bid might be important to how the brain acts at an auction. Or to put it in more familiar terms: Are we really fooled when storekeepers price something at $19.95 instead of a round twenty bucks?

Janiszewski and Uy ran a series of experiments to test this idea. The experiments used hypothetical scenarios, in which participants were required to make a variety of “educated guesses.” For example, they had participants think about a scenario in which they are buying a high-definition plasma TV, and asked them to guesstimate the wholesale cost. They were told the retail price, plus the fact that the retailer had a reputation for pricing TVs competitively.

But there were three scenarios involving three retail prices: Some hypothetical buyers were given a price of $5000, while others were given the price of $4988 and still others $5012. When all the buyers were asked to estimate the wholesale price, those with the $5000 price tag in their heads guessed much lower than those contemplating the more precise retail prices. That is, they moved farther away from the mental anchor. What’s more, those who started with the round number as their mental anchor were much more likely to guess a wholesale price that was also in round numbers. The scientists ran this experiment again and again with different scenarios, and always got the same result.

Why would this happen? Well, as Janiszewski and Uy explain in the February issue of Psychological Science, people appear to create mental measuring sticks that run in increments away from any opening bid, and the size of the increments depends on the opening bid. That is, if we see a $20 toaster, we might wonder whether it’s worth $19 or $18 or $21; we’re thinking in round numbers. But if the starting point is $19.95, the mental measuring stick would look different: We might still think it’s wrongly priced, but in our minds we are thinking about nickels and dimes instead of dollars, so that a fair comeback might be $19.75 or $19.50.


What do you guys think? Are you unconsciously influenced by when something is $19.95 vs $20?

  • 22687
    Posted by shawndiaz on April 22, 2009 [reply] 0 0
    Always, but then i look at shipping costs as well Wink
  • 22703
    Posted by phunkeey on April 22, 2009 [reply] 0 0
    Absolutely people are influenced by this. (Not me of course).
    Think about the price of gasoline. $1.85 and 9/10ths of a cent. That was a big deal when gas cost 20 cents a gallon. 19 and 9/10ths of a cent seemed like a bargain.
    • MikeG
      Posted by MikeG on April 24, 2009 [reply] 0 0
      It's amazing how many times we can get bilked by big oil companies...
    • 22935
    • Solstice
      1 6 2
      11 4 1
      Posted by Solstice on April 24, 2009
      [reply] 0 1
      If you want to have a bit of fun, after getting gas, go in and ask the cashier for your 1/10th of a cent change. It never gets old, and the responses are always hilarious, but you have to do your best to look serious and even argue a press your point a bit with them.
    • 23045
    • MikeG
      Posted by MikeG on April 25, 2009 [reply] 0 0
      It would make a nice hidden video for youtube
  • 23143
    Posted by phunkeey on April 27, 2009 [reply] 0 0
    Those videos where people get on the PA at stores are hilarious.
    • MikeG
      Posted by MikeG on April 27, 2009 [reply] 0 0
      Sounds funny. Do you have a link?

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