Consumers encounter prices ending in the number nine everywhere they shop. There’s a good reason why businesses choose to price their products and services at $19.99 instead of $20. It’s known as charm pricing, a strategy rooted in the psychology of choice.
We’ll explain why charm pricing is so effective, review examples of how businesses use it in the real world and share best practices for building a pricing strategy that fits your business.
The concept of charm prices
Shoppers see charm prices, also called psychological pricing, on a daily basis. There’s no real consensus about how this practice began, though a few apocryphal stories circulate. Still, there is little disagreement that charm prices can signal value and motivate customers, ultimately increasing sales.
“One reason charm pricing works lies in the ‘left-digit effect,'” said Riani Kenyon, an anthropologist and human behavior researcher. “Since we read numbers from left to right, the first digit has an outsized impact on our perception.”
For example, the left-digit effect makes $79.99 feel closer to $70 than $80. Logically, we know it’s essentially the same as $80, but it doesn’t always register that way in the moment. That perception can be enough to push a shopper toward a purchase.
Research backs up how powerful charm pricing can be. In one well-known study by MIT and the University of Chicago, researchers printed three versions of the same mail-order catalog, each listing the same shirt at a different price. The shirt sold better at $39 than at $44. That result isn’t surprising, as it reflects the basic law of demand: As prices fall, demand typically rises.
However, the shirt also outsold the lower price of $34. That finding suggests charm pricing can sometimes override what we’d expect based purely on lower price alone.
According to
Capital One Shopping Research, prices ending in 9, 99 or 95 can increase sales by at least 24 percent, and in some cases by as much as 60 percent. The report also found that 60.7 percent of retail prices end in 9, while only 7.5 percent end in a whole number like 0.
When charm prices don’t work
Many people say they don’t like nonround charm prices, and research supports that sentiment. When pumping gas, most drivers don’t aim to stop at $29.99 — they round up to $30.
The same pattern shows up with high-end luxury goods. This audience generally isn’t focused on getting the lowest possible price but on signaling status and quality. This approach is known as prestige pricing.
“The number 9 works especially well for everyday items and impulse buys. People associate it with discounts and value,” said Raviraj Hegde, SVP of Growth and Marketing at Donorbox. “However, prestige pricing, which involves rounding up to clean, whole numbers like $50 or $100, works better in the case of luxury and premium products. It gives a sense of quality and exclusivity, which charm pricing doesn’t.”
Context is critical when deciding between charm and prestige pricing. You need a clear understanding of what your target audience is actually responding to.
In 2012, then-CEO Ron Johnson tried to eliminate charm pricing as part of a broader effort to give JCPenney a facelift and build a more exclusive brand reputation. The shift away from constant discounts, coupons and rounded-down prices was supposed to simplify pricing and elevate the brand. However, the strategy backfired, as loyal customers missed the value they perceived from coupon cutting and steep discounts. It’s a reminder of how closely pricing expectations are tied to brand identity, especially for retailers long associated with promotions and value.
Dynamic pricing is another pricing model to consider. Instead of setting one fixed price, businesses adjust prices in response to real-time supply and demand. Airlines, ride-share platforms and e-commerce retailers use dynamic pricing to maximize revenue during peak demand and stay competitive during slower periods.
Charm pricing vs. prestige pricing
Charm pricing works best in certain contexts. Research has found that prices ending in 9 often lift sales, especially for everyday or impulse purchases where shoppers are actively comparing options and scanning for value. Many consumers read odd-ending prices — like 7 or 5 — as signals of a deal, even when the difference is only a few cents.
Source: Temu
Prestige pricing takes the opposite approach. Instead of signaling a deal, it signals quality. Luxury brands typically avoid charm digits and present prices as clean, structured whole-dollar amounts. The goal isn’t to appear cheaper; it’s to reinforce exclusivity and confidence in product quality and value.
“Charm pricing is less feasible in the sale of prestige goods or services where both trust and status play the major role,” said Hegde. “Other very realistic factors that play to your pricing strategy will have to include your audience, product positioning and prices from competition. Adjust prices to reflect market trend changes, increased costs or changing customer behavior.”
Source: Porsche
Inflation continues to influence purchase behavior.
Federal Reserve surveys show consumers still cite elevated prices as a reason for cutting back on discretionary spending, making pricing strategy even more important.
The perceived value when pricing
So, should every price end in 9? Not necessarily.
Charm pricing can signal value and make a price feel lower than it technically is. But it also sends a message. For everyday purchases, that message may be “deal.” For premium products, it can unintentionally signal “discount.”
Luxury retailers understand this. Walk through a high-end department store and you’ll rarely see $399.99. You’ll see $400. Clean, rounded numbers reinforce confidence, quality and exclusivity.
But when those same products go on sale, the pricing shifts. A $400 shirt marked down 50 percent often becomes $199.99, not $200. The moment an item is positioned as a deal, charm pricing starts to work in the retailer’s favor.
“Continuously analyze sales data and feedback for an understanding of how your pricing is helping or hurting conversions,” Hegde advised. “It’s all about finding a balance between perceived value and profitability.”
If you need to raise prices, charm pricing can sometimes soften the impact and help limit demand drops.
The use case for rounded and nonrounded pricing
So how do you decide which pricing approach makes sense? It comes down to understanding customer emotions and how the buying decision is being made.
Rounded prices are easier to process and tend to reinforce emotion. They work well when the purchase is about identity, status or celebration, like buying a luxury handbag as a reward. A clean $500 feels intentional and confident.
Charm prices, on the other hand, can pull shoppers into comparison mode. A $499.99 price tag signals value and can make them think, “this is a good deal.”
This distinction matters even more when pricing services, where buyers are weighing trust along with value. For example, a caterer working with a couple planning a wedding may opt to present rounded package pricing because the decisions are personal and emotional. But that same caterer may quote with nonrounded pricing when dealing with a corporate event planner, who will likely be comparing line items and budgets. In this case, nonrounded pricing can subtly reinforce value.
Pricing isn’t about picking a number. It’s about understanding your target audience and what’s driving the purchase.
Jacob Bierer-Nielsen contributed to this article. Source interviews were conducted for a previous version of this article.
