7 Pricing Tricks That Make You Overspend

If you automatically reach for a $39.99 sweater or load up on $11.99 albums on iTunes, you’re not alone. The strategy of ending prices with 99 cents has worked its magic on all of us.

Merchants use a variety of strategies to get us to spend more — from labeling prices without dollar signs to setting a per-customer limit. These practices are used with all kinds of products, including clothes, food, toys, cars and houses.

Whether you’re shopping for the holidays or for everyday items, it’s easy to fall for simple pricing tricks, warns Money Talks News money expert Stacy Johnson:

While you probably don’t stop to consider the pennies on a price tag, let me assure you, your friendly merchant does.

Here are seven common pricing traps — and how to avoid them.

1. Prices ending in ‘9,’ ’99’ or ’95’

Known as “charm prices,” tags that end in “9,” “99” or “95” make items appear cheaper than they really are. Since people read from left to right, they are more likely to register the first number and make an immediate conclusion as to whether the price is reasonable.

When professor Robert Schindler of the Rutgers Business School studied prices at a women’s clothing store, he found the 1 cent difference between prices ending in “.99” and “.00” had “a considerable effect on sales,” with prices ending in “.99” far outselling those ending in “.00.”

This works to the last digit on a product as small as a $1.29 iTunes download. But it’s also effective on anything from a pair of jeans to a car or house. Homes selling for $299,000 often sell faster than those costing $300,000. The reason? It’s under, rather than at, the upper limit of those shopping for houses in the $250,000 to $300,000 price range.

Pricing that doesn’t end in “9” also tells our minds a story. If a price ends in “4” or “7,” for example, it’s likely to stand out because it doesn’t end in “9.” And it subliminally suggests the seller has seriously considered the price.

2. Dollars without cents

If you see prices stated as whole-dollar amounts and no change, the retailer or restaurateur is sending the message that you’re in a high-end place. The implication is that if you’re concerned about pocket change, you should move on.

3. Prices without dollar signs

In a Cornell University study, guests given a menu with only numbers and no dollar signs spent more than those who received a menu with either prices showing dollar signs or prices written out in words.

The same tactic translates to retail stores. When items are marked “20” without the dollar sign, retailers are hoping customers won’t associate the amount with money. Thus, they will be less likely to keep a running tally of how much they’re spending as they shop.

4. ’10 for $10′ trick

Stores push deals like “10 for $10,” aiming to get shoppers to buy items like soup, cereal, etc., in bulk. But here’s something stores don’t advertise: You don’t always have to buy in bulk to get the deal. In many cases, you can just as easily buy one for $1. Ask your retailer before loading up your cart.

5. Per-customer limits

When stores add limits to products — like “limit four per customer” — it tricks shoppers into thinking the product is scarce, the price is low or both. It also gives the impression of big demand. You find yourself buying several — when you would normally buy just one — to avoid missing out.

6. ‘Free’ promotions

Retailers know “free” is the magic word. So, they roll out deals like “buy one, get one free,” sometimes persuading us to buy things we normally wouldn’t. Free-shipping incentives requiring us to spend at least a certain amount of money also draw us in.

7. Simple prices

Simple prices, especially on products susceptible to future markdowns, allow shoppers to quickly compare how much they’re saving. It’s easy to compute the discount on a product originally priced at $50 that now costs $35, as opposed to an item originally priced at $49.97 that is now on sale for $34.97.

The bottom line

The psychology of shopping affects virtually everything you buy. These tricks are so simple, it’s easy to believe you’re too sophisticated to fall for them. However, odds are that you do — and so do millions of other people. Otherwise, retailers wouldn’t use these practices.

But being aware they exist — and work — may help you overcome them, and make you a smarter shopper.

How do you resist pricing psychology? Share with us in the comments below or on our Facebook page.

Jim Gold contributed to this report.

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