It might have been Rowland H. Macy, but nobody really knows where the idea of "99 cents" got its start as a pricing concept, reports Tim Arango in the New York Times (2/8/09). Macy ran what is believed to be the first "99 cent" advertisement in 1880, for "reliable black silk." Another theory has it "that the advent of the cash register, invented in 1879 ... allowed merchants to thwart pilfering clerks by charging a penny less than a full dollar amount, thereby forcing cashiers to open the register to give change to a customer."

The one thing that seems clear is that items priced at "99 cents" seem to attract shoppers. "We always noticed that the 99 cents sold much better," says Dave Gold, founder, with his wife, of the 99 Cents Only stores. They discovered this in the 1960s while pricing wine at 79, 89 and 99 cents, and at $1.49. "The 79 cents sold better at 99, the 89 cents sold better at 99, and of course the $1.49 sold better at 99." The Golds parlayed that insight into a chain of 282 stores that's "worth more than a half billion dollars. In the last quarter, sales were up 8 percent; profits, 31 percent."

Researchers at the University of Chicago meanwhile "found that when the price of margarine dropped from 89 cents to 71 cents at a local grocery chain, sales improved 65 percent, but that when the price fell to 69 cents, sales rose 222 percent." The explanation, according to Robert M. Schindler, a Rutgers marketing professor, is that shoppers "perceive a 9-ending price as a round number price with a small amount given back." He also says a study in the women's apparel category "found that the one-penny difference between prices ending in .99 and .00 had 'a considerable effect on sales'." ~ Tim Manners, editor.