There is evidence that the rightmost digits, or endings, of retail prices can communicate meanings to consumers.  In particular, the 99 price ending has been shown to lead consumers to judge that a price is one that has been discounted or is otherwise relatively low.  This low-price meaning that consumers ascribe to the 99 ending is curious, because it conflicts with research indicating that a 99-ending price is actually likely to be among the higher prices in the market for the item in question.

In this paper, it is proposed that the 99 ending has acquired its low-price meaning through the belief of managers that the use of this ending makes a price appear lower than it actually is.  This belief leads retailers to often use the 99 ending to reinforce an advertising claim that a price is low or discounted.  Consumers then observe that prices that are claimed in ads to be low often have the 99 ending, and thus they come to associate 99 endings with low prices.

To test this idea, two large samples of newspaper price advertisements were examined.  For each sampled price ad, the rightmost two digits of the selling price were recorded.  In both samples, 99 was the most commonly occurring two-digit price ending; 95 and 00 were the second or third most common endings.  Each ad was classified as making a low-price appeal if it contained a reference price, a savings amount, or a verbal cue that the selling price represented a savings to consumers.  Thirty-nine to 48 percent of the sampled ads were classified as making a low-price appeal.

In both samples, it was found that there was a strong relationship between the use of the 99 price ending and the presence of a low-price appeal.  For example, in Sample 2, the 99 ending occurred almost twice as often in the ads that made low-price appeals than in the ads that did not.  Further, the 99-ending/low-price appeal correlation was shown to be robust over price level and product type.

These results support the hypothesis that the 99 ending’s low-price meaning derives from retail managers’ tendency to supplement a low-price claim with any available means to make the price appear to be low, and it indicates that the salience of price advertising leads it to dominate other sources of information in the consumer’s learning of price-ending meanings.

For the retailer, these results support the use of the 99 price ending as a means to reinforce other low-price cues in consumer advertising.  However, because the results also indicated that the 95 price ending was not positively related to the presence of a low-price appeal, they suggest that the often-assumed similarity between the 99 and 95 endings may not be true.  Further, these results suggest that each commonly used two-digit price ending could have unique connotations that would have to be individually investigated and that it is possible for these price-ending meanings to be deliberately managed.

This investigation also supports the consideration by public policy makers of the ability of price advertising to overshadow the relationship between price endings and price levels that is actually present in the marketplace.  This would be of particular concern if retailers were found to intentionally exploit price-ending meanings by, for example, favoring 99 endings for prices known to be relatively high.  Responses to such abuses could include promoting consumer awareness of the issue and tightening the rules governing the truth of retailer claims of discount and relative low price.