$199 vs $200: The Difference of a Dollar is Never Just a Dollar
August 30, 2016
In: Money Talk
I was recently told a story about a man named Uncle Bill who went to Colombia, stayed in a hostel, and climbed the ladder into his bunk—even after the four bottles of wine.
Uncle Bill wasn’t your average uncle, though. Uncle Bill was eighty-nine years old. Which sounds like a lot, when you say it out loud, right? Eighty nine! What?!
But you know what it sounds less than?
One sounds pretty old, but not as old as ninety. Once you hear ninety, it’s an all-new level of old. We think of ninety as being nearly impossible.
A man in his eighties, though? That’s do-able. (Even if you are hooting at all the young whippersnappers.)
If you’ve ever wondered why the price is $199 instead of $200, then, it’s not because they’re trying to fool you.
It’s because we need to fool ourselves.
It’s much easier to justify spending a hundred dollars and some change (we write off the second half of the number) than two hundred dollars—even if the difference is only one dollar. Once you put the two in front of it, you’ve changed the game. Once you put the two in front of it, it takes the price into a new category. Once you put the two in front of it, you’re telling them Uncle Bill is ninety.
The psychology around the number is often more important than the actual number.
The difference of a dollar is never just the difference of a dollar.