What it means
A shop can display $49.99 instead of $50, and the cash difference is tiny but the first visible digit changes from 5 to 4. Some research explores whether buyers overweight that leftmost digit when comparing prices.
Other settings may favour rounded prices that signal simplicity or quality, and a large online experiment published in PLOS One did not reproduce a left-digit effect in its particular purchasing task, a reminder that no single psychological pricing trick works everywhere. The technique is most relevant when shoppers see prices quickly or compare nearby options.
It may be less useful for a negotiated B2B contract, where buyers review total cost, service and terms, and a premium brand can prefer round numbers if they fit its presentation. Test the pricing pattern with the actual audience, distinguishing an effect of the ending from the effect of a genuinely lower price, placement, discount label or different products.
The profit calculation is straightforward in principle: a lower unit price reduces contribution per sale unless cost changes, so the business needs enough added purchases to offset the smaller contribution. If a product costs $60 and sells for $100, its contribution is $40 before shared costs, and at $99 it is $39, so sales must increase sufficiently to preserve total contribution.
An apparent lift in units is not enough by itself. Design a clean test by randomising comparable customers or locations where possible, keeping stock and promotion similar, and measuring conversion, average order value, returns and contribution.
A price ending can influence the mix of customers or items bought, not just one product's units. Avoid changing too many prices at once if that makes attribution impossible, and note that small samples may not detect a real but modest effect.
Transparency matters, so the total payable, taxes and fees should be clear. A price of $99.99 is not 'less than $99,' and an exaggerated crossed-out reference price can mislead buyers.
Currency rounding at checkout may also affect practical payment, so check local rules for displayed prices and cash rounding before a campaign, because the goal is a fair, understandable offer, not to exploit confusion about the final bill. For owners, use charm pricing as a hypothesis: first set a price that covers cost and fits customer value and brand positioning, then test the ending against a suitable rounded alternative.
Keep a record of the results and revisit as competitors and customer habits change. A good product, availability and trust usually matter more than the last digit of the sticker.
In practice
Real-world examples.
Example
A retailer tests $99 against $100 for the same item in comparable settings. Half of its stores show each price for four weeks with the same promotion. It compares units, returns and contribution rather than checkout count alone.
Example
A premium service keeps a round price because customers expect simple packages. A $2,000 consulting retainer looks more credible than one priced at $1,999. The firm treats the round figure as part of its brand.
Example
Finance checks whether any conversion lift offsets the lower contribution per unit. It sets the break-even number of extra units before the test begins. The result decides whether the new ending stays.
Formula
Calculation
Total contribution = (Selling price - Variable cost per unit) x Units sold, before shared fixed costs
Worked example. A fictional item costs $60 to supply and sells 1,000 units at $100.
- Contribution is ($100 - $60) x 1,000 = $40,000.
- At $99, contribution is $39 per unit; $40,000 / $39 = 1,025.6, so about 1,026 units (a 2.6% rise) are needed to exceed $40,000 before other changes.
- If units rise only to 1,010, contribution is 1,010 x $39 = $39,390, which is $610 lower than before despite the extra sales.
Measure the real lift rather than assuming the ending caused it.Case study
Seen in the real world.
This illustrative and entirely fictional example follows Lantern Shelf, an invented homeware shop. It changed a popular lamp's price from $150 to $149 and saw more sales in the next week. The manager credited the last digit, but an email promotion and a competitor stockout occurred at the same time. The team ran a later, controlled comparison with equal promotion and available stock. It measured contribution and returns, not just checkout count.
The invented test showed little reliable difference, so the shop chose the clearer price for its brand. It did not claim that all charm pricing fails; it concluded only that this use had not shown a useful gain. The case illustrates the difference between a pricing hypothesis and credible evidence. Lantern Shelf now records any promotion or stock event alongside each price change, so later reviews can separate cause from coincidence.
Watch out
Common mistakes.
- Treating a left-digit effect as a universal law.
- Celebrating extra units without checking contribution.
- Hiding taxes or fees behind an attractive headline ending.
Questions
People also ask.
Does a price ending in 9 always increase sales?
No. Evidence and customer response vary by context.
Is it a discount?
It can be a small price reduction, but the tactic concerns the ending and perception.
How should it be tested?
Compare similar buyers with other factors held steady and measure profit as well as conversion.
From the founder's library
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