President Donald Trump says he has directed the Treasury Department to stop minting new pennies, citing the rising cost of producing the one-cent coin.
Wouldn’t this round up the cost of everything to the nearest nickel? Doubt places would round down.
Believe it or not, no. I actually think loss of the penny might actually be either break-even or a slight benefit to the consumer on that front.
Most places advertise prices of $Y.99 so they can say that the item “costs less than $X” and get the psycological benefits associated with it. Saying $9.99 is less than $10 might sound like unreasonably silly semantics especially when you look at it on paper, but it has an extreme and effective psychological effect on the average consumer. It’s why it’s been standard practice for over a century.
Stores wouldn’t be forced to change their pricing scheme by this in practice, as pennies will be around for decades to come even if they stopped making new ones tomorrow. But if they were, and for some reason stores were forced to round to the nearest nickel, I could see them going from $X.99 to $X.95 in an effort to maintain that psychological edge.
Nitpick: It was more about association. When you see a price of $x.88, that’s almost always from Walmart. They want their price to be distinguishable from everybody else’s, and easier to pick out when you’re looking at a list of comparable prices when all of them are just doing $x.99 instead.
And the 11 cent savings does add up over time at a consumer level. It means nothing as far as Walmart is concerned. But if you go grocery shopping and buy, say, 100 different items (which you can easily do during one shopping trip that covers multiple weeks or if you have a large family), that’s $11 in savings. So when you’re price comparing, it basically leads to “Well, they’re all about the same price everywhere. but if I buy it all at Walmart, I save about ten bucks. So I’ll go there.”
It’s all about associating “$x.88” with Walmart, and making sure that if everything else is equal, Walmart still has that one last edge that tips the scales ever so slightly in their favor when it comes to consumer decisions. And it is amazingly effective.
I think that might just be a by-product of it. I remember back in a college marketing class when they first started implementing it at Walmart and they were one of a few examples of retail companies using the pricing structure already.
Stretching my memory the others were a regional dollar type store, a regional electronic place that would have sales for like $88.88, and a number of car places where they would use 1s, 0s and 8s to make the price look cheaper. Like $10,888.00.
In Germany there are some stores like DM that round down to the next 5 cent. It was also cheaper for them to adjust all prices from .99 to .95 than to pay for all the handling of the 1 and 2 cent coins. They still accept them though.
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Believe it or not, no. I actually think loss of the penny might actually be either break-even or a slight benefit to the consumer on that front.
Most places advertise prices of $Y.99 so they can say that the item “costs less than $X” and get the psycological benefits associated with it. Saying $9.99 is less than $10 might sound like unreasonably silly semantics especially when you look at it on paper, but it has an extreme and effective psychological effect on the average consumer. It’s why it’s been standard practice for over a century.
Stores wouldn’t be forced to change their pricing scheme by this in practice, as pennies will be around for decades to come even if they stopped making new ones tomorrow. But if they were, and for some reason stores were forced to round to the nearest nickel, I could see them going from $X.99 to $X.95 in an effort to maintain that psychological edge.
I think you’re right. Walmart does x.88 pricing because the x.99 pricing started losing psychological effectiveness.
Nitpick: It was more about association. When you see a price of $x.88, that’s almost always from Walmart. They want their price to be distinguishable from everybody else’s, and easier to pick out when you’re looking at a list of comparable prices when all of them are just doing $x.99 instead.
And the 11 cent savings does add up over time at a consumer level. It means nothing as far as Walmart is concerned. But if you go grocery shopping and buy, say, 100 different items (which you can easily do during one shopping trip that covers multiple weeks or if you have a large family), that’s $11 in savings. So when you’re price comparing, it basically leads to “Well, they’re all about the same price everywhere. but if I buy it all at Walmart, I save about ten bucks. So I’ll go there.”
It’s all about associating “$x.88” with Walmart, and making sure that if everything else is equal, Walmart still has that one last edge that tips the scales ever so slightly in their favor when it comes to consumer decisions. And it is amazingly effective.
I think that might just be a by-product of it. I remember back in a college marketing class when they first started implementing it at Walmart and they were one of a few examples of retail companies using the pricing structure already.
Stretching my memory the others were a regional dollar type store, a regional electronic place that would have sales for like $88.88, and a number of car places where they would use 1s, 0s and 8s to make the price look cheaper. Like $10,888.00.
In Germany there are some stores like DM that round down to the next 5 cent. It was also cheaper for them to adjust all prices from .99 to .95 than to pay for all the handling of the 1 and 2 cent coins. They still accept them though.
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