Original subtitles

- Hi. I'm William Lidwell.

And this is Universal Principles of Design.

In this movie, the Left-Digit Effect

when the price is right.

Walk the aisles of any grocery store,

or browse any e-commerce site online,

and you'll find that most products

have prices that end in "99".

Retailers clearly believe there is

some benefit to ending prices this way.

But what is it?

And where did this idea come from?

The convention first appeared in

newspaper ads in the late 1800s.

Nobody knows for sure what started the trend,

but one theory is the introduction of the cash register.

Or, as it was named at the time,

the "Incorruptible Cashier".

You see, prices ending in "99"

required cashiers to make change,

announcing sale with the rings and dings

of the mechanical register.

This prevented unscrupulous clerks

from silently pocketing bills

when checking out customers.

But that was then. What about now?

Researchers have found that consumers overweigh

the left-most digits of prices,

a tendency they dubbed the Left-Digit Effect.

This effect suggests that our emotional reaction

to the difference between, for example,

$29.99 and $30 is not as if it was $0.01,

but as if it was $1. Or in some cases, even more.

When we consciously think about the pricing, of course,

we know the difference is only a penny.

But our subconscious emotional reaction responds

as if the difference is greater.

This likely happens because we read from left to right,

and our emotional reaction happens

as soon as we process

the first digit in the sequence.

The result of the Left-Digit effect

can mean an increase in sales of up to 15%,

which is why this pricing strategy

continues to be used today.

But employing the Left-Digit Effect

isn't always a good strategy.

For example, one study found that prices

ending in 99s not only indicated

discounted pricing to consumers,

but also low quality.

Or as prices ending in round numbers indicated

high prices, but also high quality.

So 99s may be good for Walmart,

but not so good for Neiman-Marcus.

And in many non-Western cultures,

The additional complexity of 99s in prices

is perceived as the retailer being

tricky or deceptive.

So whether you use your knowledge

of the Left-Digit Effect to increase sales in your business,

or, merely to help you resist those

bargain-basement holiday specials.

Remember: There is power in knowing

when the price is right.