Question on pricing

[crook]

Hi everyone. I was watching a TV show and an advertisement got me thinking. The product in the ad was priced at $49.99. I wonder why the price was $49.99 and not $50!

I am sure many of us have pondered on this question. Can anyone among us explain the reason behind this pricing to me? I don't want to be mad when I see a product listed at $99 and not $100!

[kidakaka]

Could it be to incorporate a sales tax or VAT? As it is, you are going to pay the vendor the round sum, so the 1 cent which goes away could be attributed to VAT or some such.
--- ANOTHER THOUGHT ---
The 1 cent will not be recorded on the receipts. The 1 cent will also not be given back to you. Thats an unrecorded revenue . Sheer profit in black.

[The_Big_K]

Originally Posted by crook

Hi everyone. I was watching a TV show and an advertisement got me thinking. The product in the ad was priced at $49.99. I wonder why the price was $49.99 and not $50!

I am sure many of us have pondered on this question. Can anyone among us explain the reason behind this pricing to me? I don't want to be mad when I see a product listed at $99 and not $100!

Boy! I discussed this with a friend yesterday and we could not come up with a good answer.

Here are my thoughts ( just thoughts, not supported by facts )

1. The product looks cheaper ! When a product is priced at 999 bucks, we tend to think that its little more than 900 bucks and below 1000. This might tempt us to buy the product.

2. As Kidakaka said, if its a cash deal, you won't really care for balance.

3. I doubt it has anything to do with the tax ( or am I wrong here? ). I'd just call it 'smart pricing' for the reason mentioned in point 1.

Anyone with better answer?

-The Big K-

[ash]

I think its just for psychological reasons, like Big K said. In business studies, a marketing tactic is to have that "99" at the end to make it seem much cheaper and more worth the money. $1.99 would look very nice against something like $2.01, even if its 2 cents difference. Also, customers would believe that if they keep buying something that is even cent cheaper, they could save money in the long run.

Plus, it does give a sense that the shop would reduce the price of the product for the sake of the customer, at the sacrifice of some profit. Just my thoughts

[Elisa]

I would like to know the actual reason. Someone help!