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- Hi. I'm William Lidwell.
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And this is Universal Principles of Design.
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In this movie, the Left-Digit Effect
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when the price is right.
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Walk the aisles of any grocery store,
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or browse any e-commerce site online,
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and you'll find that most products
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have prices that end in "99".
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Retailers clearly believe there is
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some benefit to ending prices this way.
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But what is it?
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And where did this idea come from?
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The convention first appeared in
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newspaper ads in the late 1800s.
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Nobody knows for sure what started the trend,
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but one theory is the introduction of the cash register.
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Or, as it was named at the time,
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the "Incorruptible Cashier".
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You see, prices ending in "99"
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required cashiers to make change,
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announcing sale with the rings and dings
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of the mechanical register.
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This prevented unscrupulous clerks
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from silently pocketing bills
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when checking out customers.
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But that was then. What about now?
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Researchers have found that consumers overweigh
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the left-most digits of prices,
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a tendency they dubbed the Left-Digit Effect.
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This effect suggests that our emotional reaction
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to the difference between, for example,
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$29.99 and $30 is not as if it was $0.01,
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but as if it was $1. Or in some cases, even more.
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When we consciously think about the pricing, of course,
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we know the difference is only a penny.
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But our subconscious emotional reaction responds
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as if the difference is greater.
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This likely happens because we read from left to right,
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and our emotional reaction happens
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as soon as we process
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the first digit in the sequence.
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The result of the Left-Digit effect
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can mean an increase in sales of up to 15%,
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which is why this pricing strategy
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continues to be used today.
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But employing the Left-Digit Effect
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isn't always a good strategy.
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For example, one study found that prices
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ending in 99s not only indicated
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discounted pricing to consumers,
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but also low quality.
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Or as prices ending in round numbers indicated
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high prices, but also high quality.
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So 99s may be good for Walmart,
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but not so good for Neiman-Marcus.
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And in many non-Western cultures,
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The additional complexity of 99s in prices
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is perceived as the retailer being
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tricky or deceptive.
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So whether you use your knowledge
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of the Left-Digit Effect to increase sales in your business,
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or, merely to help you resist those
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bargain-basement holiday specials.
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Remember: There is power in knowing
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when the price is right.
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