Charm pricing, also known as psychological pricing or odd-even pricing, is the strategy of setting prices that end in 9, 99, or 95 rather than rounding to the nearest whole number. A product priced at $19.99 is perceived as significantly cheaper than one at $20.00, even though the difference is just one cent.
This effect occurs because consumers tend to read prices from left to right and anchor on the first digit. The "1" in $19.99 registers more strongly than the "99" that follows. Studies show this technique can increase sales by 24% compared to round-number pricing in certain categories.
Interestingly, premium and luxury brands often avoid charm pricing entirely, using round numbers like $100 or $250 to signal quality and sophistication. Analyzing a brand's use of charm pricing versus round numbers can indicate their market positioning—value-oriented brands heavily favor .99 endings while premium brands maintain whole numbers.