In the Eye of the Beholder: The Interplay of Numeracy and Fluency in Consumer Response to 99-Ending Prices[Conditioning Prices on Purchase History]

Across three laboratory studies, a biometric eye tracking and facial recognition experiment, and a secondary data analysis, we reveal the unique interaction of consumer numeracy and numerical processing fluency as a significant determinant of consumer response to 99-ending prices. We argue that less numerate individuals create mental analog representations around 99-ending prices’ left digits, whereas highly numerate individuals encode 99-ending prices as their one-cent neighbor, with consumers responding more favorably to prices when they mentally encode them around a fluent number. Specifically, highly numerate individuals respond more favorably when 99-ending prices (e.g., 17.99) border a fluent number (i.e., 18). Conversely, less numerate individuals respond more favorably when 99-ending prices (e.g., 16.99) contain fluent left digits (i.e., 16). We provide empirical evidence for the effects of this processing difference on liking, purchase intentions, and actual sales. We also obtain evidence for the underlying process using eye tracking and facial recognition that reveals that highly (vs. less) numerate individuals exhibit less anxiety when processing multi-digit prices, and consequently fixate sooner, more frequently, and for longer durations on the right digits of a price. The findings contribute significantly to the price processing literature and yield substantial managerial implications.