The quick answer is for high quality products. Research has shown that consumers see products that use round prices as higher quality. In one older study, people perceive the quality of a pair of shoes as higher when priced at $75.00 than when priced at $79.95. Did you catch that? A lower price with a round number was perceived as higher quality than a higher price with a “just-below” number.
This only works for higher priced products. A $20 price for a pair of shoes would not be seen as higher quality than a $19.99 pair of shoes. The level of the price is so low that the price ending has little if any effect.
Another reason to use round prices goes back to the “lazy subtractor” argument. Starting with the price of a sports coat at $400, and then putting it on sale for $299 looks like a much bigger discount than starting at $399.
If you provide a service and charge by the hour (lawyers, consultants, etc.) then you should absolutely use round prices. Someone buying multiple of your hours will not be lazy subractors, and you will look more professional and of higher quality by using round prices.
How do you decide whether to use a round price or a just-below price? Ask yourself the following question: “What message am I trying to give with this price?” If the answer is this is a good deal, a low price, then you will likely want to use a just-below price. If the answer is this is a good product and it’s worth what you pay for it, then lean toward using a round price.
Action: Look at your product portfolio. Make a conscious decision for each product about which price ending you should be using.