The Psychology Of Money: Is $5 The New 99 Cents?

5 dollars, 5 bucks, five dollars, five bucks, price

Photo: Flickr / laszlo-photo

Research has proven people are drawn to prices ending in .99, but now it seems $5 is the new pricepoint driving shoppers to spend, reports Fast Company’s Martin Lindstrom.”More recently Google released Google Wallet, a new mobile payment system. Then it offered customers $5 compensation for the pain of having to endure a few security hiccups.

This was not long after online purchases of perfomances by comedians Louis C.K. and Aziz Ansari spiked. Each of those shows cost exactly $5. In certain instances, it appears, $5 is the new 99 cents. Or at least the price point works on a similar psychological mechanism.”

In customers’ minds, they feel like they’re spending less ($4.99 seems closer to $4 than to $5, for example) than something else that might end with an even .00. 

Lindstrom doesn’t offer much of an explanation as to why $5 could sway people to spend, though John T. Gourville, a professor of business administration at the Harvard Business School, speculated in a New York Times article last year it may be because people love to buy in increments—that is, buying five of something for $5.

What are your thoughts? Would $5 sway you to spend? 

Now see the crazy things people are willing to do for $5 >

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.