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Price psychology in online stores: what is actually proven

Price psychology is full of rules of thumb, often without a source. Some effects are well researched, others fall apart once you read the study. Here are the well-supported ones, with their limits.

4 min read · September 28, 2026

Two price tags: 19.90 dollars against 20.00 dollars feels noticeably cheaper, 19.95 against 19.99 hardly, because the first digit doesn't change

1 Charm prices work only when the first digit changes

A price of $19.90 feels noticeably cheaper than $20.00, even though they're only 10 cents apart. The reason is the left digit. In five experiments, Thomas and Morwitz showed that the effect appears only when the leftmost digit differs. Between $19.95 and $19.99, nothing happens.

Field tests with a retailer confirm the direction: prices ending in 9 raised demand in all three experiments, more strongly for new items. They worked less well when the product was already marked "Sale".

2 Round prices for gifts and emotional purchases

Not every price should end in 9. Across five studies, Wadhwa and Zhang found that round prices "feel right" when the decision is driven by feeling, and precise prices when it's driven by thinking.

For a gift set, $40 fits better than $39.87. For a technical spare part, precise is fine.

3 An anchor works even when it's arbitrary

In a classic experiment, people estimated what percentage of UN member countries are in Africa after a wheel of fortune had shown a number. Those who saw 10 gave a median estimate of 25%, those who saw 65 a median of 45%. Paying for accuracy didn't change that.

In a store, the most honest anchor is the single-unit price above the tiers: $19.95 for one, $17.96 each when you buy three or more. Never use an invented compare-at price. In the EU, a price reduction has to be measured against the lowest price of the previous 30 days, and the EU Court of Justice ruled in 2024 that an advertised percentage must be calculated from that price too.

4 Percent for small prices, dollars for big ones

The same discount feels different depending on how you write it. In a 1998 study, a reduction on the expensive product felt bigger in dollars, on the cheap one in percent. Jonah Berger turned this into the "Rule of 100" in a popular book: under $100 use percent, above it use dollars.

It's a rule of thumb, not a law. Where there's room, Baymard recommends showing both: "25% off, you save $5".

5 Free beats cheap

Zero is a special price. When a cheap chocolate in a cafeteria went from 1 cent to free, its share rose from 21% to 71%, even though the better chocolate also got one cent cheaper at the same time. What that means for gifts and free shipping is in Free gift or discount.

6 A nearby goal speeds people up

People speed up when a goal is close. In a study with café stamp cards, a 12-stamp card with two stamps already filled in was completed in 12.7 days. A blank 10-stamp card took 15.6 days, although both required ten purchases.

For your store: show in the cart how far it is to the next tier, and set thresholds a typical cart can reach. The study was about stamp cards, not carts; the effect plausibly carries over, but it hasn't been measured specifically for online shopping.

Two stamp cards: a blank one with ten spots, full after 15.6 days, and one with twelve spots, two already stamped, full after 12.7 days — Both cards require ten purchases. The one with a head start filled up nearly three days faster. Source: Kivetz, Urminsky, Zheng, 2006.

7 A decoy offer isn't a sure thing

The decoy effect is a favorite of marketing blogs: a third, clearly worse option makes the one you want look better. In lab studies with tables of numbers, it works. A 2014 study showed, though, that the effect often disappears with real products, photos and personal experience.

If you want to try it, test it. On the Grow plan and higher, Shopify lets you do that with a Rollouts experiment.

8 Stay honest: no fake progress, no inflated prices

A head start motivates, as research on endowed progress shows. Use it where it's true: "You already have 2 of 3 items for the volume discount." Invented progress, artificially high compare-at prices or a countdown that restarts cost trust and, in many countries, can violate consumer protection law.

Sources

Common questions

Do prices ending in 9 always work?

No. Research shows the effect mainly when it changes the leftmost digit, like $19.90 instead of $20.00. It's weaker for items already marked as on sale and for emotional purchases, where round prices often fit better.

Which compare-at price is allowed in the EU?

When announcing a price reduction, you have to state the lowest price of the 30 days before the reduction. The EU Court of Justice ruled in 2024 that an advertised percentage must be calculated from that price. This is not legal advice.

Should I show discounts in percent or in dollars?

As a rule of thumb, a percentage feels bigger on smaller prices and a dollar amount on bigger ones. The safest route is to show both, as Baymard recommends: "25% off, you save $5".