Ever wonder why no one sells products or services for a round figure?

The best example might be gasoline prices. A gallon may sell for $1.49; it will not retail for $1.50. Why not? Would 1/10 of a cent put someone off? In financial terms alone, it would not. But, round figures represent barriers to how much consumers are willing to spend, and by pricing an item below the round number, it seems significantly less expensive than the math would indicate. A buyer with a $500 budget can rationalize a $499 purchase. In addition, people focus on the first number in a price; what follows is factored into the decision as well, but if the initial figure puts off a potential customer, that's a lost sale.

As for specific pricing for commodities, there are two schools of thought. One relies on bargain-basement costs, undercutting the competition in hopes that volume sales will make up for the limited profit margin. The second strategy relies on the principle of "you get what you pay for", and the item is deliberately priced high in the hope that the cost will indicate high quality. Obviously, your price should cover the cost of marketing, and overhead, leaving you with some profit. Price can make a difference since there are so many competitors in the arena.

 You are far better off with a small profit from a growing base of customers than with a large margin from a few customers who might be tempted to go elsewhere because of price.