Charm Pricing: Why Most Prices End In “.99” Instead Of “.00”

A bar graph summarizing the results of a 1996 study on charm pricing by Robert M. Schindler and Thomas M. Kibarian, showing a 7.98% increase in sales when items are priced at “.99” instead of “.00”.

If you walk through a grocery store or browse an online shop, you will see it everywhere: $4.99, $19.99, $99.99. It is rare to see clean-cut prices of $5, $20, or $100. Called charm pricing or .99 pricing, this trend of ending prices with .99 may seem trivial, but it is one of the most quintessential hallmarks of the modern market. Understanding why this puzzling phenomenon started and why it still works tells you a lot about how businesses think and how people react to numbers.

The earliest documented use of prices like 99 cents came about in the late 1800s. At that time, shopkeepers used mechanical cash registers invented by James Ritty. These registers had no automatic recording features, and employees could pocket cash if they wanted to. By pricing an item at 99 cents instead of $1, the customer had to be given a penny in change. This forced the clerk to open the cash register to get coins and ring up the sale. When it was opened, the transaction was recorded on a paper tape inside the register, and the owners could see how much was sold. The practice of pricing items with 99 cents attached started as a theft prevention strategy, rather than a clever marketing scheme.

Historical ads from Montgomery Ward in 1899 show goods priced at 9 cents or 99 cents. Newspapers from the period show the same pattern. By the early 1900s, chain stores such as Woolworth had trained customers to expect prices ending in 9 for inexpensive goods. The habit became part of everyday commerce before the psychological effects were even measured.

Modern behavioral science has shown why 99 pricing has come all this way. People read numbers from left to right and pay the most attention to the first digit. A price of $4.99 is perceived as closer to $4 than to $5, even though the difference is only one cent. This is called the left digit effect. Marketing researchers Thomas and Morwitz published a well-known paper in 2005 showing that people tend to estimate prices ending in 9 as being lower than they actually are because they anchor on the left digit.

A famous 2004 field study by the University of Chicago and MIT tested three prices for the same mail-order dress: $34, $39, and $44. The $39 price outsold the $34 price even though it was higher. The number 9 at the end signaled a bargain, and the lower left digit reinforced the impression of cheapness. This effect works best when people are making quick decisions about familiar goods like soap, cereal, or clothes. It is weaker for big purchases such as cars or houses, where buyers compare numbers carefully.

.99 pricing also conveys a message about the type of product, signaling value and discounting rather than premium quality. Luxury brands are well aware of this. Rolex, for example, often prices its products at clean numbers such as $7,500 or $15,300 instead of something like $12,999.99. Chanel and plenty of other high-end stores do the same. A clean number makes the product appear deliberate and fancy. It tells the customer that the company is not chasing pennies and that quality matters more than any bargain.

This means the decision between $99.99 and $100 is not just about a penny. It is a branding decision. A small café might price a muffin at $2.99 to look affordable, while a high-end bakery might price the same muffin at $3.00 to look artisanal. The price ending is a cue to the customer about what experience they are buying.

Different candies and chocolates at a supermarket priced at “$2.99”.

Even when customers know the trick, it still works because habits create expectations. If most cereal boxes cost $4.99, then a cereal priced at $5.00 feels slightly overpriced. Retailers do not tend to break this pattern. In online shopping, this is even more pronounced, as e-commerce sites often sort search results from lowest to highest price. If your product is $20.00 and your competitor’s is $19.99, the competitor shows up first. That one cent can translate to thousands of extra clicks or sales. 

Some critics argue that .99 pricing is outdated because few people pay with cash and pennies. Still, research on online shopping proves the effect shows no sign of abating. A 2019 analysis of Amazon listings found that items ending in 9 or 99 had higher click-through rates than those with round numbers. Even when people pay with a phone or a credit card, the number on the screen still informs their perception of the deal.

Digital retailers sometimes experiment with other odd endings like .77 or .90 to stand out while still giving a sense of thrift. For example, Steam, the video game platform, often uses prices such as $7.49 during sales. This signals novelty and bargain at the same time.

The .99 habit is strongest in the United States and Western Europe, but it’s not universal. In Japan, for instance, many prices are rounded to the nearest whole number and include tax already. Meanwhile, in Australia, the smallest coin is five cents, but retailers still list .99 endings on digital receipts because the psychological effect remains even when no one handles pennies. In parts of the Middle East and Africa, where haggling is common, price endings matter less because the starting price is only a point for negotiation. But as international chains spread, so does charm pricing. McDonald’s and H&M use .99 in dozens of countries because they know it increases perceived value.

How much difference does a penny really make? Imagine a store selling 10,000 units of a product at $9.99. Rounding up to $10.00 would yield an extra $100 in total. If that change caused even a slight drop in sales—like two percent, for example—the store would lose far more than $100 in revenue. This is why retailers are so reluctant to round up. They would rather lose the penny than risk losing volume.

Large-scale retailers even study the effect by region and by category. For staples like milk or bread, .99 endings are almost universal. For electronics, .95 endings may perform better. For online subscriptions, irregular numbers such as $4.79 suggest that the price was calculated rather than made up, which can build trust. Prices end in .99 instead of .00 because of a mix of history, psychology, competition, and habit. It started as a way to force cash register honesty. But over time, it evolved into a subtle cue that something is a bargain, and it persists because customers and sellers are locked into a shared expectation. Even when the penny itself has almost gone obsolete, the mental penny still counts.

A single cent may seem like nothing, but in the right context, it drastically changes perception and behavior. It reminds us that money is not just numbers on a tag. Whether you are a shopper trying to resist the lure of .99 pricing or a business owner deciding how to price your goods, understanding this quirk can give you a small but real advantage.