Why Does Everything Cost 99p

The world does not need a five pound coin. It doesn’t need a commemorative silver guinea or a special three pound coin with the queen’s head on it.

What the world needs is a 99p coin. (If you’re reading this blog in some other economic zone substitute pounds and pence with your own currency.)

Like rain, flies and politicians, an enduring feature of my life, and probably yours too, is the insistence retailers place on prices ending in 99. My conclusion is that it’s a psychological thing. 99p doesn’t sound as expensive as £1, but do retailers really think we’re fooled when they price things at £899.99?

There’s no tax advantage to the retailer. They don’t pay tax on individual items, rounding the price down to the nearest quid.

There’s no manufacturer of one pence pieces lobbying business groups to maintain the practice and the demand for one pence pieces.

Do retailers hope customers will say ‘keep the change, it’s only a penny?’ That’s a lot of kept pennies in a year. My advice is to stay there until they cough up the readies and give you the right change. If they ‘haven’t got any ones’ bloody well stand there and inconvenience them. Pressure from the market would soon make them see sense.

Some companies, like the fashion store Next, do round off to the nearest pound. They obviously realise that no one will waste time trying to choose between something priced at £10 and something priced at £9.99.99p

It’s such a ubiquitous practice that even I do it. My ebooks are priced at $2.99 in America because I know anyone dithering over price will be put off if it says $3!! (After writing this blog post I’m going to go and change my prices everywhere. . . .)

There is a school of thought that says rounded off numbers look arbitrary, not thought through, and business people don’t want anyone thinking they don’t know what they’re doing. £7.99 looks like a lot of thought has gone into it, with its superfluous decimal point and additional digits.

You might think it’s trivial, but Henrik Bergman at the Oslo School of Environmental Studies* recently researched the additional time and resources needed for computers to calculate all the 99s. In a single trading year, the computing power needed contributed 0.75% of atmospheric carbon dioxide. (Imagine if the figure had been 0.99%.)

Computers would run quicker if the calculations were simpler, simple people could add up a shopping list quicker, we’d need less metal for all the one pence pieces. And we wouldn’t keep finding old Czech coins in our change that get rejected by the Coinstar machines.

In a cashless society it might not matter any more. The poor have no choice but to pay up, and the rich can afford to forfeit their pennies. In a cashless society all the unused pennies could be given to small children to play on the slot machines at Blackpool. That was the only benefit of 99p pricing when I was young: pennies being recycled for the waterfall machine and the penny tray at Mrs Lowe’s toffee shop on the corner.

But next time you see a BMW in a British showroom priced at £34 799.99 tell them to round it up to 35 grand and throw in some floor mats. We’re not fooled by it any more.

* I made that bit up in the hope it would be one of those fake statistics that goes viral.

11 thoughts on “Why Does Everything Cost 99p

  1. I always wait for the penny change as a matter of principle, the same as you, because I believe it’s a ploy to maximise tax-free profits. But have you noticed that the shop assistants always say “Your PENNY change, sir,” when handing you your change? They never mention an amount in any other circumstances.
    Cheers, Alen

    Liked by 1 person

  2. That .99 thing is just to get you to decide to buy. When you go to pay, the actual price has tax added (at least here in Canada it does), so a 9.99 thing ends up costing 10.12 or something. Since we got rid of the penny, though, if you’re paying in cash, the price is rounded to the nearest .05. The 10.12 thus becomes 10.10. But if you pay with a credit or debit card, it’s 10.12. But yes, my ebook prices end in .99 too.

    Liked by 1 person

    1. That all sounds fiendishly complex. In the UK a £9,99 item will already include VAT, so the original price would be something nuts like £8.71. They generate a retail price that will’round up’ to 99p when the sales tax is added. And then things with no sales tax end in .99 too. What a palaver.

      Liked by 1 person

      1. Hmm. Sounds like the opposite of what happens here. I think UK’s VAT is similar to our GST (Goods and Services Tax). That’s a federal tax. But since we’re a confederation of provinces, we also have PST (Provincial Sales Tax) in some provinces and HST (Harmonized Sales Tax) in others. British Columbia “harmonized” its federal and provincial taxes a few years ago, but then we had a referendum and it was reversed. So we have GST + PST. Come to think of it, that referendum was sort of like your Brexit vote — a lot of people voted against the harmonized tax as a way of showing displeasure with the provincial government, not because they had sat down and thought about taxes. And yes, it is fiendishly complex. The federal/provincial thing affects almost everything in Canada. Much more than you ever wanted to know, I’m sure!

        Liked by 1 person

  3. “* I made that bit up in the hope it would be one of those fake statistics that goes viral.”
    Nice one!
    Put in up on YouTube add a fake pressure group name; sit back and watch the fun

    Liked by 1 person

  4. It’s to stop dishonest shop assistants sliding your £20 note into their pocket when no-one’s looking. If what you’ve bought is £19.99, then they’ve got to put it through the till in order to give you 1p change.

    Liked by 2 people

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