Why does the $9.99 choice feel so much better than the $4.99 option?

Is it because of the 2 extra benefits we get? Is it because it feels like the more premium choice, even though the only real difference is the price? Or is it because businesses know that we are willing to spend an extra $5, just to feel like we have made the right decision?

If you said yes to any of these, continue to read, you have just entered The Persuasion File.

Because here’s the twist: it’s actually none of those. Or rather, it’s something much smaller, and much sneakier, than any of them.

                    Have you ever thought about why we are so quick to purchase that $9.99 subscription, yet if it said $10, we would avoid it? In the world of marketing, we call that the left-digit effect. Look at the first 9 and look at the 10, do you understand the feeling you get when looking at both prices back and forth? The feeling of guilt you get for comparing two prices, even though it is just a $0.01 difference? That’s part of the left-digit effect, and yes, psychologically speaking, it got me too.

                      Since we’re on the same page now… I might as well explain what this left-digit effect is to a deeper level, right?

The Left-Digit Effect

                  The left-digit effect is based on how the human brain puts an emphasis on that first digit it sees – which in our case would be the $9.99 over the $10, even though it is just a $0.01 difference. Researchers like Manoj Thomas and Vicki Morwitz found that consumers judge prices largely based on the leftmost digit alone, explaining what businesses have been using for decades. Now you may be asking yourself, “why do our brains put such an emphasis on that first digit, when it’s just a 1 cent difference?”, well… here’s why.

                    I don’t think it would be a far-fetched idea to believe that growing up, most of us were not walking around with $9 and 99 cents in our pockets. Whether it was ranging from a $1 bill to $100 bill, no one was really carrying the 99 cents, right? So then, why do businesses always include it? I’ll tell you this: it’s not because they expected anyone to walk around with the exact change. These businesses know that the moment we see that .99 cent Arizona drinks, or that $9.99 Netflix subscription, we don’t give a second thought to what comes after the .99 – we just think about how close we are to saving money, not how close we are to spending more. 

                    Now, there are brands out there who do their best to avoid the left-digit effect – not because the target audience wouldn’t notice the pricing, but because that same psychological effect would work against them instead of for them.

                                                                                              Let me explain.

                    Brands like Rolex or Chanel would not price an item that costs $3,500 at $3,499.99. Why? It’s because the same way we view our .99 cent Arizona that we do not think twice about, is not the same way we would view an item that feels cheaper because of that “.99”. Even though it is still a $0.01 difference, at this price point, brands want to promote the luxury feeling you get from purchasing their luxury item at this price range. At the end of the day, a luxury brand wants to promote confidence, and having items at a set price will do exactly that.

                    So, even though a brand could avoid the left-digit effect, the one thing a brand could never avoid is pricing psychology. In this case, this takes us back to our first question – why did the $9.99 choice feel so much better than the $4.99 one?

                    To tell you the truth, it was never really about the extra benefits. It wasn’t about feeling premium, and it wasn’t about convincing ourselves to spend that extra $5 just to feel like we made the right decision. It all came down to just one digit – a single 9 staring back at us where the 1 should have been, doing more psychological work on us than what the other $9.98 combined would’ve done.

                     And just like I told you earlier, this got me too, but not just in prices, you will also see this effect in the “$9.99/mo” after the free trial expires, the “$4.0925” gas station sign, which is still counting on that decimal tail you don’t register, and now every checkout page that was built by someone banking on the first digit that you’d be looking at.

                     The next time you look at a price, and you see that “.99” at the end, ask yourself this: Is it actually cheaper? Or did someone study what we talked about and try to predict where your eyes would land?

                                                                                                    p.s. there’s more 🙂

         So, What Do You Do With This…?

                        Well, if you’re the one setting the prices – whether it’s a product, a service, or even a subscription tier – the left-digit effect isn’t trivia. It’s a marketing decision.

                         A few things to know before using it:

• It doesn’t scale forever. As I mentioned earlier, the higher the price goes, the less effective it becomes. A $2,999 item doesn’t have the same psychological effect over $3,000 that a $9.99 item gets over the $10 one. Context matters. Always.
• It works best when proximity is your friend. This effect works best when you have someone comparing two numbers side by side – like a subscription-based service that has a $9.99 plan right next to the $4.99 one. The closer the comparison, the better the outcome.
• It isn’t free. If you are not signaling correctly that this is a “deal” that you’re offering, it will cost you more in perception than what it would save you in pennies – (this is why Rolex prices at $6,200 not $6,199).

                         Understanding this isn’t about being mad at the price tags you’ll continue to see. It’s about understanding the why, to either use it, or of course, to walk away from it at your discretion.