Product pricing and tech journalism

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This past Tuesday, I wrote a news story about the new Roku 3 media streamer, which has a list price of $99.99. Our style at TechHive is to round up to the nearest dollar, so I wrote that it costs $100. Simple enough.

So why did The Washington Post, TechCrunch, Huffington Post, USA Today, Engadget, and many others list the Roku 3 as $99 in either their headlines, articles, or both? (Cnet, for its part, pegged it at $99, while at the same time rounding up the prices of all the other current Roku products it mentions.)

So why? Because we’ve been conditioned to drop everything after the decimal point by years of product marketing—companies that sell a product for $99.99 will usually talk about it costing $99 in briefings and marketing material, for example. And let’s face it, $99 sounds better than $100. (Note that I’m in no way picking on Roku, just using this product announcement as an example of something I see all the time.)

From a marketing perspective, it makes a lot of sense. Industries tend to have established anchor pricing in product categories. We generally accept that media streamers, for example, cost around $100 at the high end. Anything (even slightly) less than that is both a bargain and fits in with our predisposed thinking about what we should be paying.

And listing products as just less than round numbers—usually with the number 9 in them (as in $149, $79.99, and so on)—is known as charm pricing. Although there may be only a penny difference between $99.99 and $100, there’s a huge psychological gap between the two. And it lets companies say a product is in the “sub-$100” category and make you think you’re getting extra value. Marketers have been using such techniques for a long time. (If you want to write that a $99.99 product costs “less than $100” go right ahead. It may be only by one cent, but at least it’s accurate.) The Apple TV, by comparison, actually costs $99. You see the same anchor and charm forces at work, but the price is actually a little less than its top competitor.

So what’s my point? That tech journalists should be in the business of accurately representing specs and facts about products. I know each publication has its own style for dealing with things like pricing. Some use street prices instead of manufacturer suggested retail prices (MSRP), which are usually inflated, in no way represent what you’ll actually pay, and let retailers show how much they are “discounting” the price for you. But would you write that an app that costs 99 cents on Apple’s App Store is free because it hasn’t crossed the $1 threshold? Of course not (and in fact, we round those prices to $1).

Our job is to try and cut through the marketing as much as possible and explain the reality. Otherwise, why read a tech site instead of just a vendor’s website?

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