How Big Is That Discount? The Last Digit Determines Consumers' Perception Of The Deal

According to a study published in the Journal of Consumer Research the last digit of a product’s price determines your perception of how much the item has been discounted.

If the price ends in a lower number (less than 5) you feel like you got a better deal.

From Science Daily:

The researchers show that “right-digit effect” influences consumer perception of sale prices. When the right digits are small, people perceive the discount to be larger than when the right digits are large. In other words, an item on sale for $211 from the original price of $222 is thought to be a better deal than an item on sale for $188 from an original price of $199, even though both discounts are $11.

In addition, the researchers find that when consumers view regular and sale prices with identical left digits, they perceive larger price discounts when the right digits are “small” — less than 5 — than when they are “large,” or, greater than 5.

“When consumers examine multi-digit regular and sale prices in an advertisement, they read those prices from left-to-right. If the left (hundreds) digits are identical, consumers will pay less attention to those digits, and instead will focus primarily upon the disparate right-most (tens and units) digits in the price comparison process.,” the authors explain.

“Our findings indicate that comparative price advertising can distort consumers’ perceptions in ways unintended by the seller.”

Thankfully, consumers can easily avoid this effect by actually doing the math. Don’t guess, calculate.


Sales Prices: How Right Digits Affect Perception of Discounts
[Science Daily via boingboing]
(Photo:DCVision2006)

Comments

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  1. Buran says:

    “”Our findings indicate that comparative price advertising can distort consumers’ perceptions in ways unintended by the seller.”

    Our findings indicate that comparative price advertising can distort customers’ perceptions in ways very intended by the seller, e.g. to provide the impression that a much-better deal is being offered than is actually on the table.

  2. I do hate when items are priced with .99 at the end, I’ll admit… and that gasoline is $3.14 and 9/10 cents too. What the hell?

  3. andrewsmash says:

    My calculations involve looking at all of the numbers to the left of the decimal point, thinking about the brand name, the store, and the return policy of both, and then checking my bank account. When that coincides with an actual desire for the product and the fact that the item is usually more expensive, at that point I decide I have gotten a deal.

  4. Sonnymooks says:

    My god, this is a just a nice way of saying consumers are idiots.

  5. thepounder says:

    “In addition, the researchers find that when consumers view regular and sale prices with identical left digits, they perceive larger price discounts when the right digits are “small” — less than 5 — than when they are “large,” or, greater than 5.”

    I’m sorry… I can do all the math in my head just like any decent middle-school kid could.

    I love that part, “identical left digits…” It’s so stupid. I also cannot believe someone got paid to do this research either… how do I get that job?

    @Sonnymooks: Indeed it is

  6. TPIRman says:

    @Buran: Well put. The more specific research is interesting, but hasn’t this phenomenon been known to and exploited by sellers for a very long time?

    Hard to argue with Consumerist’s recommendation to take an extra moment and do the math. Not only is it obviously the more sensible route, but I find that I get more lasting satisfaction from a discount when I’ve done all the math than when I rely on a vague sense of “the smiling sign told me it was a good deal, so OK.”

  7. hubris says:

    I have *always* hated the fact that prices end in .99, .95, etc. It’s such a retarded idea. Or maybe an idea for retards would be more appropriate. I want to know what short bus riding brain trust they tapped to get this information. Maybe they went to Wal-Mart.

  8. stubblyhead says:

    @AngrySicilian: they’re called price points. a number of studies have shown that significantly more people will buy an item priced at 9.99 than will buy an identical item at 10.00.

  9. darkclawsofchaos says:

    People are actually fooled? I mean shouldn’t one know the MSRP and compare it to that?

    @ SONNYMOOKS – thats exactly what they are saying, the euphisms “distort perceptions in ways unintended”

    @ THEPOUNDER – to get this job, you must graduate from a four year college and possibly get a masters degree. Make some theory up, convince some rich corporation it is in their best interest to do so and bingo bango, you got the job. This is the revenge of graduate student poverty

  10. Don Roberto says:

    @Buran: Very true, buran, however I would use i.e. (id est or “that is”) instead of e.g. (exempli gratia or “for example”) :)

  11. RickinStHelen says:

    I always thought it was .99 regular price, .98 sale price, discount price, and .97 closeout can’t reorder. At least it was at sears and a few other places.

  12. thepounder says:

    @darkclawsofchaos: Me thinks these would be the same sort of people who say “let’s drill down into that concept…” or “let’s peel this onion a little more…” or “let’s not reinvent the wheel here”, as well as my favorite “where’s the value added?”
    Or another fave, “the price point is just not on par with the rest of the market… blah blah.” Oh, “price point”… how about just “price” and stop trying to sound uber-smart.

    Indeed, you’re completely correct… that’s their revenge. deep sigh

  13. Sudonum says:

    My old man used to own a carpet store. He had a salesman that swore by some variation of this. When quoting a price my old man would usually round the total down to the nearest whole dollar or whole ten dollar increment. This salesman would make sure he quoted a price down to the penny, even if it was higher than normal. IE, $587.21 instead of say $585.00. He said customers felt like he really “sharpened his pencil” and had the price down to the penny. He was quite successful. Funny how human nature works sometimes.

  14. swalve says:

    Are people still fooled by this clownery?

  15. SaraAB87 says:

    Apparently, yes. The most sleezy one I have seen in recent years is when Gamestop was selling used Nintendo DS systems for 109.99. Sure they could just label it 110$ and be done with it, but then they would get far less sales, and yes those used, and beat up by children systems were flying off the shelves only because they had no other systems in stock, typical gamestop for you. Also you know it worked when your friend comes up to you and says, I got a great deal on my Nintendo DS system, it was only 109.99, in those exact words.

  16. Chicago7 says:

    That’s just stupid.

    If something cost $20 and there were 2 on sale items, one $19.84 and the other $18.99, would anybody buy the $19.84?

    Isn’t it true that the way they mark down clearance specials at certain stores, the lower last number IS the biggest discount? So, maybe it’s an ACTUAL FACT, rather than a perception.

    In terms of selling things at 19.99, etc – if they REALLY wanted to help us, they would figure out what it costs WITH tax, so I don’t have to fool around with a lot of pennies. The tax and price should come out to even dollars.

  17. agb says:

    @Chicago7: Maybe for stuff like fast food, but pricing goods based on local taxes can get messy when you’re talking about a corporation like Macy’s or Best Buy that has many stores in many states. (And even messier in Arizona, where different counties have different taxes!)

  18. JugalFrew says:

    Target changes the last digit every time they further discount something. Example: 19.99 regular price, 17.98 sale price, 15.96 clearance price, 12.93 Final clearance price…

  19. FLConsumer says:

    @Sonnymooks: Yep, you’ve got it right.

    ‘Though what does that mean for those of us who round up any dollar amount to nice round numbers and actually bothers to do the math on “sales”?

    @Chicago7: Careful what you wish for… We already have that in gasoline prices. Cities, states, and counties love being able to raise the gas taxes since the consumer won’t ever see them. At one time, the gas stations in FL used to have a sticker on them with a breakdown of taxes per gallon. Haven’t seen one in years. I personally want to be able to see how bad I’m getting screwed (like the 13% tax on electricity & 20% tax&fees on cell bills).

    I DO wish retailers were forced to disclose Total Cost of Ownership on things with extra charges (cell phones come to mind). I forget which carrier it was, but they actually couldn’t/were not able to tell me what the actual monthly bill would be on a plan after taxes/fees/etc. If they don’t even know, then how is a consumer supposed to know?

  20. Transient says:

    People absolutely buy into this stuff. I always think it’s stupid. I’m in sales and it’s been ongoing experience that, if I try to give the customer the benefit of the intelligence doubt and refer to prices as (for example) $50 versus $49.99, there’s a drastic difference in perception. Even relatively bright folks, when asked later, say the price is $49 and feel like it’s a better deal.

    Yet another reason to hate the job. :P

  21. Nytmare says:

    Listening to radio ads where the speaker rattles off department store or grocery store prices can be amusing. Nine ninety-nine ninety-nine ninety-nine ninety-nine-nine-nine-nine-nine-nine-nine-nine, ad freakin NAUSEUM.