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How $9.99 Became the Most Compelling Price in Retail
Companies are redesigning packaging and slashing marketing budgets to maintain the psychologically important threshold.
There’s a magic number that makers of everyday goods are obsessed with: $9.99.
Just a penny more and shoppers start to turn away.
Keeping prices under $10 has long been a strategy used by U.S. retailers. It is a tried-and-true price point that encourages people to switch brands and try new products, from soap to soda, pain relievers to party favors. And it’s more important than ever with many Americans feeling stretched by inflation.
But it’s getting harder for companies to keep products under that price point. Higher fuel prices, tariffs and other factors are driving up the costs for making products. That is forcing many companies to drive hard bargains and sacrifice profit margins to hold prices below the psychologically important $10 threshold.
Michael’s, the craft-store chain, is redesigning store layouts to expand its selection of under-$10 offerings. Toy maker Hasbro has simplified packaging for its action figures and board games. Boston Beer began offering Twisted Teas that come in a four-pack instead of a six-pack. Walmart cut the price of 24-packs of Coke and Pepsi to just under $10 in a summer promotion announced last week. And upstart brands looking to grow are settling for lower margins and cutting marketing budgets in hopes they can attract new shoppers with price tags that start with a nine.
“$9.99 is a real price point that drives a lot of consumer behavior,” said Chris Cocks, the chief executive of Hasbro. Cocks calls it a “snackable” price, “great for a quick treat, a gift or a little show of love or appreciation.”
Hasbro has redoubled efforts to meet the $9.99 price point, working with designers and suppliers to cut product-packaging costs, Cocks said.
It now sells its Connect 4 game in a sleeve rather than a box. Packaging for its Transformers Cyber Changer action figures have been simplified. And the new World Cup edition of its Monopoly Deal card game comes with no packaging at all—the case that holds the cards does the job on its own.
Rival toy company Spin Master, meanwhile, credits advances in automation for helping it streamline its manufacturing process for a modernized version of its Rubik’s Cube it is introducing later this year. The new process helps the cube rotate more smoothly—and keeps the price under $10.
“The appeal of prices like $9.99 is not about saving a penny,” said Vicki Morwitz, a professor of marketing at the Columbia Business School in New York. “Consumers tend to categorize prices into ranges, so having a price be under $10 can feel different than a price that is $10 and above, even when the actual monetary difference is negligible.”
As inflation has pushed many everyday prices above familiar thresholds, products that remain below those thresholds may stand out more than before, she said.
While fans of craft beer are often willing to pay more, consumers of Boston Beer’s hard Twisted Tea are so sensitive to that sub-$10 price point that the company made a four-pack of 16-ounce cans. CEO Jim Koch said that the six-pack pricing for 12-ounce cans had gotten over $10, so “this gives us an entry point.”
The majority of the products at Michael’s, the craft store, are already under $10, but the company is looking to increase its offerings below that price by an additional 10% by the end of the year. Chief Merchandising Officer Stacey Shively said the accessible price point allows for customers to add fun to their shopping trip while staying within their budget.
It will be adding spots on the sales floor that store managers can use to feature products such as charms, markers or party favors.
Companies that sell certain products on Amazon have an added incentive to keep their prices below $10. In the baby products, beauty, health and personal-care categories, the e-commerce giant charges an 8% referral fee for items that sell for $10 or less, compared with a fee that can reach 15% for items that cross that threshold.
Carlin Consumer Health CEO James Barickman said Amazon’s fee structure was a key consideration when it introduced its Mineral Ice Extreme cooling pain reliever with a $9.99 price tag in June.
The company is also betting that the price will help it appeal to its target audience: Gen Z and Gen Alpha athletes.
Standing out against bigger competitors is why Ryan Lupberger, the co-founder and CEO of natural cleaning-product company Clean Cult, hasn’t raised prices in seven years, even though holding the line has shrunk his profit margins.
When its competitors often price hand-soap refills at $10.99 or $11.99, Clean Cult—which packages its cleaners in milk-carton-like containers to avoid using plastic—has intentionally kept some of its products at $7.99. Lupberger says that price drives newcomers to try the product. And it regularly sets discounts for its laundry detergent to reduce the price from about $12.99 to just under $9.99. When it does so, sales more than double.
“People don’t spend tons of time looking through the shelves of retailers, right?” said Lupberger. When shoppers see a price that starts with a 10 instead of a nine, “that’s a very, very different price experience…Immediately you’re going to think that’s expensive because your brain doesn’t process the number.”
Other psychologically important price points: below $5 and below $20.
Bubble Skincare founder and CEO Shai Eisenman says many of the customers who buy her products—such as the Cosmic Rain hydrating mist or Star Dew eye cream—say $20 is their price ceiling. Because of this, she hasn’t raised prices in the past few years—even as her margins have shrunk. She has had to cut her marketing budget to hit her price target.
“It’s always a struggle to ensure we’re competitive,” Eisenman said. “But at the same time, we hear from our community that they feel much stronger economical pressure, and we want to make sure we are delivering on price.”
Write to Natasha Khan at natasha.khan@wsj.com
