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  • Category: Finance and Investments

    Rationale behind 99 pricing of products and services

    Can anyone clarify why the price of products are generally kept like 99, 199, 499 etc. Whether its retail products or services like phone bill it is common to see prices or plan rentals kept 1 rupee less than round figure price. As per my knowledge this could be playing with human psychology as it gives the impression that price is less than Rs 100 if it is kept as Rs 99. There could be other reasons as well and it would be interesting to discuss this.
  • Answers

    4 Answers found.
  • This is purely a marketing technique based on the human psychology and habits. The image and sense imprinted in our mind is that a three figure number is larger than a two digit figure. S 99 or 99.99 may appear to be less and 100 a quite bigger amount.

    This feeling and perception is more cemented by the slab we use in many areas of our daily life. For example the tax rate may be lower for those coming in the slab 1 to 99 and it will be high fo slab coming from 100 to 999. Most tariffs we pay in our daily life are made in slabs. Say electricity or water .The rate and tariff for a consumption slab of upto 99 will be one and lowest. The slab for 100 to 500 and then 501 t0 999 may be still higher.
    Thus it is well imprinted that even the lowest number with higher number of digits is very large than the largest number with the same lower number of digits. Similarly numbers having decimals appear t us as much lower in value that the next higher whole number even if the real difference is a single decimal .

  • I have got the reference behind this rationale in book "Why We buy - Paco Underhill". He summarized the mentality of the people behind retail purchase. How they consider profit and loss. And how they manage to understand how it can help their money.

    When anyone pays 10 Rs. It feels like a lot. But the cost 9.99 Rs goes to show that they are saving something small. Unless the person is rich enough, people do care for even small penny. And this is another reason why many shopping mall and the online sites make use of the 9 in their pricing. Some also give illusion of 1 free for 3 purchases. And some give 5 for 3 and so on. It depends on how the model is managed for the profit.

  • Good question posed by the author. By reducing that one rupee, there would be drastic change in the figure of price and that would sound to be discounted and we the people go for it. Bata has really understood this technique since many years. Their products are at 99,199,299 and so on. We know they wont return the one rupee but still we feel that we have purchased a discounted item. But what I want to share that have you ever bargained at Bata and paid less than the so called 99 tags. Yes I have been benefited and they gave me the discount. It seems everyone was wondering and that is record.

    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • The simple answer is that we so called customers of products we buy are being fooled as it is our mind psychology that rupees ninety nine is less than hundred.
    Moreover in most of the cases the balance of one rupee coin is not returned by the seller.

    Thus it becomes necessary for all the buyers or customers not to get fooled by such offers and use their intelligent mind while making any such purchase.

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