Psychological pricing is setting prices to fit how people read and judge numbers, not just what the product costs.
The best-known form is charm pricing: ending a price in 9 or .99 so $4.99 feels closer to $4 than to $5. Controlled field studies show the effect is real but conditional, and in our database of real A/B tests, the price level itself moves revenue far more than the ending digit.
This page covers what the research shows, where it fails to replicate, and what tests from real stores, SaaS companies and apps say about price points.
For the wider set of mental shortcuts behind it, see our psychology hub.
Pricing psychology: what it covers
Pricing psychology is the study of how the way a price is shown changes what people think it is worth and whether they buy.
The number on the tag is only part of it.
Endings, anchors, comparisons and wording all shape the judgment.
The main tactics fall into a few groups:
- Price endings. Charm prices ($19.99), round prices ($20) and precise prices ($19.83) each send a different signal.
- Anchors and comparisons. A crossed-out price or a pricier plan shown first sets the reference point. Our anchoring page covers this.
- Framing. "$1 a day" versus "$365 a year", or "25% off" versus the final price. See the framing effect.
- Price level. Raising or cutting the actual price. This is not a perception trick, but it is the lever with the biggest results in our data.
Why do any of these work? A Kellogg review of price-cue research by Eric Anderson and Duncan Simester summarizes the core finding: usually no more than half of customers questioned can recall the prices of recently purchased products.
When people don't know what a fair price is, they lean on cues.
A price that looks discounted can work as a signal even when it isn't.
That also points to the limit. Cues matter most when people lack price knowledge, and matter less when they compare closely or already know the going rate.
Charm pricing: what research shows
Charm pricing means ending a price just below a round number: $9.99 instead of $10, or $49 instead of $50. It is everywhere.
One review of the research notes that as many as 65% of US retail prices have been estimated to end in 9, and academics have studied the practice since at least 1936.
The field experiments
The strongest evidence comes from real catalogs. Anderson and Simester ran three field experiments with a women's clothing catalog, published in Quantitative Marketing and Economics in 2003. Customers were randomly sent catalog versions that differed only in price.
A $9 ending raised demand in all three experiments.
In one test, the same items were priced at $44, $49 and $54. Demand at $44 and $54 was nearly the same, but demand was significantly higher at $49.
The cheaper price did not beat the 9-ending one.
Two details from that work matter for practitioners.
The effect was stronger on new items the catalog hadn't sold before, and weaker when items already carried a "Sale" cue.
Both fit the idea that a 9 ending tells shoppers "this is a deal" when they have no other signal.
The left-digit effect
A second explanation is about reading, not signaling.
Manoj Thomas and Vicki Morwitz ran five experiments, published in the Journal of Consumer Research in 2005, on when a nine-ending price feels smaller than one a cent higher.
Their answer: only when the leftmost digit changes.
$2.99 feels cheaper than $3.00. $3.59 versus $3.60 shows no such gap.
Scanner data backs this up at scale. Avner Strulov-Shlain studied about 3,500 products across 25 US supermarket chains in a 2023 Review of Economic Studies paper.
Shoppers reacted to a one-cent rise from a .99 price as if it were more than a 20-cent rise.
Retailers priced as if the bias were smaller, and the paper estimates they gave up 1-4% of potential gross profit by doing so.
The bias is not limited to prices. In 22 million wholesale used-car sales, Lacetera, Pope and Sydnor found sale prices drop in jumps at each 10,000-mile odometer mark, with smaller drops at 1,000-mile marks.
Where it fails to replicate
The effect is not universal. A 2022 PLoS ONE online experiment with 266 participants and 4,788 purchase decisions tested just-below prices (1.99, 8.99), round prices (2.00, 9.00) and odd controls.
Purchase rates were 47.1%, 45.9% and 45.3%, and the differences were not significant.
The authors suggest the effect may be smaller than assumed, may need side-by-side comparisons, or may have faded as shoppers learned the trick.
Round prices also have a case of their own.
Monica Wadhwa and Kuangjie Zhang found across five studies in the Journal of Consumer Research that round prices ($100.00) suit purchases driven by feeling, while non-round prices ($98.76) suit purchases driven by reason.
Gifts, treats and premium goods may do better with a clean round number.
So the fair summary is: charm pricing can raise demand, mostly when the left digit drops, the item is new, and shoppers have no other price cue.
It is a cognitive bias, not a guaranteed lift.
Our cognitive biases guide covers how to treat lab findings like this one.
Charm, round and precise prices compared
Each ending style has its own evidence and its own best use.
This table sums up the studies cited on this page.
| Ending | Example | What it seems to signal | Best fit | Wrong choice when |
|---|---|---|---|---|
| Charm (9 or .99) | $49, $19.99 | A deal or low price | New items, value-focused buyers, prices just above a round number | The left digit doesn't change, a sale badge already signals the deal, or the brand is premium |
| Round | $50, $100 | Quality, simplicity, a feeling-led choice | Gifts, treats, luxury and premium plans | Buyers compare prices closely on practical goods |
| Precise | $98.76 | A carefully calculated, reason-led price | Practical goods, B2B quotes | The purchase is emotional or the price needs to feel easy |
99 cent pricing: what A/B tests show
Here is the honest part. Among the 1,724 results in our test database, we have no clean test that changes only the ending, such as $20.00 versus $19.99 with everything else the same.
Price tests in the wild almost always change the price level too.
What they do show is that the level, and how it lines up with what buyers expect, decides the result.
Tests that moved away from charm prices
Convertibles ran an A/B/n test for an adult wellness brand that moved two products from $99 and $99 to $125 and $90.
Profit per visitor went from $0.44 to $0.68, a 54.7% lift.
The winning pair dropped one charm price and kept a round one, which shows the ending was not what mattered.
MarketingExperiments ran a four-day test for a subscription site that priced the same plan at $10.00, $12.50 and $14.95 a month.
The round $10 price won with 156 orders and $1,560 in revenue, versus 94 orders and $1,175 at $12.50 and 74 orders and $1,106 at $14.95. No significance figures were published, so treat it as a short micro-test.
Tests that kept .99 endings and changed the level
App teams nearly always price in .99 because app stores push them there, so their tests isolate the level.
PropGPT raised its weekly price from $6.99 to $9.99 and saw 47.5% more proceeds per user.
SellRaze went the other way, cutting its annual plan from $59.99 to $44.99, and gained 10% in ARPU.
Same ending, opposite moves, both winners. See subscription app pricing for more paywall tests.
The Boston Globe tested regular weekly rates after a $0.99 intro offer.
A $3.99 regular rate brought the most total revenue, 163% more than $4.99. But the $0.99 control won on subscriptions and had the lowest cancellation rate, so the winner depended on the metric.
Lower is not always better
PriceCharting tested a "Starts at" label next to its button.
"Starts at $4" did better than $2 or $1, though at 91% significance there was no clear winner.
A price that looks too cheap can signal low value, which fits the signaling account of price cues.
@oliverkenyon
@DaveDiederen
Convertibles
MarketingExperimentsHow to test price endings yourself
If you want to know whether .99 helps your store, test it directly rather than copying a habit. A simple setup:
- Change one thing. Compare $X.00 against $(X-1).99 so the left digit changes. Testing $24.99 against $24.95 tells you almost nothing, according to the left-digit research.
- Pick new or unfamiliar products first. That is where the field studies found the biggest effect.
- Judge on revenue or profit, not conversion alone. A charm price earns a cent less per order and may change order mix. Use revenue per visitor as the main metric.
- Plan for a small effect. Ending effects, where they exist, are much smaller than the level changes above, so you need a lot of traffic to detect one.
- Match the product. For premium or emotional purchases, include a round price arm, in line with the Wadhwa and Zhang findings.
Our price testing guide covers the setup, including how to show different prices without breaking checkout or trust.