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Denny's Daily Zinger: 3 Centuries of Setting Prices

April 14, 2014 By Denny Hatch
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Where did the .95 come from (as in pricing a $9.95 item)? Most people will say it sounds a lot cheaper than $10.

Not so.

In the days before cash registers, if a shirt was priced at $1.00, a dishonest store clerk could hand it to the customer, take the customer's $1.00 bill and pocket it.

So retailers hired cashiers and priced shirts at 95¢. Sales clerks were forced to hand over the customer's $1 bill to the cashier and get back a nickel for the customer.

When cash registers came along, .95 pricing scheme remained. Customers expected it.

3 20th Century Pricing Techniques

  1. See what the competition was charging and do likewise.
  2. Add up cost of goods sold, overhead plus profit margin and price it accordingly.
  3. Have white sales and after-Christmas sales.

21st Century "Dynamic Pricing" 
What triggered this column was Patrick Healy's New York Times story of how Disney producers took the old "Lion King"­­—after 16 years onstage in New Yorkand turned into the top-grossing show on Broadway in 2013.

From Healy's story:

"Everyone would love to get their hands on Disney's formula," said Paul Libin, a veteran producer and executive vice president of Jujamcyn Theaters, which owns five of Broadway's 40 theaters. "All Broadway shows are getting into dynamic pricing as a way to survive, but 'The Lion King' has really mastered it."

Takeaway to Consider

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