The Power of 9

Ever wonder why retail prices are almost always given as $9.99, $99.99 or $9999.99?

Always one cent under $10, $100 or $10,000?

It’s an even smaller difference with gas prices: Always something like $3.50.9 instead of a flat $3.51, etc.

That’s just a TENTH OF A CENT difference!

And it’s been that way seemingly forever – at least in my memory.

According to the Internet (which knows EVERYTHING), the practice of pricing fuel with a fraction of a penny started in the 1930s. Congress first implemented a $0.01 federal gas tax in 1932 as a temporary measure, putting that money towards reducing deficits connected to the Great Depression.

So why don't station owners simply round-up the price of a gallon these days?

The answer is marketing.

Pricing gas by 9/10ths-of-a-cent works a lot like when other stores sell items for prices ending with $.99. A price of $2.89.9 gives the individual the impression they are only paying $2.89 per gallon when they are essentially paying $2.90 – two insignificantly different prices that still can make a difference when a customer is picking a gas station to patronize.

Rounding up that fraction to a full extra penny would barely matter to most drivers. So why is it still there?

While it’s insignificant to the individual consumer, that 9/10th of a penny per gallon does add up to quite a bit in the grand scheme of things.

In 2014 the American fuel industry brought in an additional $1.2 billion with that 9/10th of a penny rather than rounding down to the nearest cent.

Now that’s some REAL moolah!

Pricing gas by the 9/10ths-of-a-cent works much like when retail stores sell items for prices ending with “.99.″ Shoppers place much greater emphasis on the first number in a price and tend to ignore less significant digits.

So a price tag of $4.99 ends up seeming a lot cheaper than $5, even though people paying in cash often readily throw away that one penny they saved.

When fueling their vehicles, customers typically only pay attention to the first three digits of the price. A price of $2.29 and 9/10ths gives the customer the impression they are only paying $2.29 per gallon when they are essentially paying $2.30.

This universal practice allows gas stations to take advantage of the power of pricing things ending with a “9,” while effectively collecting the next penny up.

Sneaky marketers. It’s all in the “9’s,” I guess.