November 14, 2013 Evans on Marketing Business Analytics and Marketing Information, Consumers and Their Behavior, Pricing competition, customer expectations, opportunity, planning, price 14 Odd pricing ($799 rather than $800; $5.99 rather than $6.00) has been used by marketers for a hundred years. Do you agree with the conclusions stated in this video? Do we really see $799 as $700 rather than $800? TwitterPinterestFacebookSpotifyInstagramLinkedInLike this:Like Loading... Related
14 Replies to “What Is the Impact of Odd Pricing?”
Reblogged this on Retailing: From A to Z by Joel Evans.
I really feel that odd-pricing is overrated. Retailers believe that the 1 cent off and the .99 creates a psychological affect that stimulates the buyer into buying the product. In actuality if the buyer is interested in the product and have a need/want for the product are going to buy it regardless. The penny off is just the retailer losing out on profits. There are billions of people purchasing consumer goods yearly. 1 penny may not sound like a lot but when you multiply that by billions of people…well you get the point.
I absolutely agree that consumers see $799 as $700 rather than $800. In my opinion, it isn’t the number that follows the first digit that matters. It is the first number in the price that matters more. For example, the difference between $99 and $100 is that third digit. Once a third digit is added to a price, it turns the customer off. I think that odd pricing is a very smart idea that should still be used today.
Odd marketing has two main benefits. One of the benefits is that is has that psychological impact on the consumer that the product is actually cheaper than it really is (ex. $9.99 rather than $10). Secondly, it also makes it more difficult for the employee to steal money from the company. This is so because if the customer purchases a product that is $9.99, the retailer must open the register to give back the customer $.01 in return. If the customer pays with a $10 bill and the product costs $10, the retailer can easily pocket the $10 since they do not have to open the register to give the customer change back.
I totally agree with it. It might sound ridiculous but it is true. I spent a long time overcoming this psychological trick and even now still fall into the trick. Sometimes, when I look at the price and its 24.99, I know its actually 25, but I just cant help but to ignore the .99 and think “um, its only 24” and go for it. But it usually happens to me when I am purchasing something relatively cheaper. If I want to buy something expensive like camera lens or so, .99 really doesn’t work anymore. If it says 899.99, then it is 900. It is no more 800 any more. So I think, maybe, just maybe, odd-pricing works well when goods are relatively cheaper. For expensive goods such as laptop, camera and TV, people are likely to be more rational.
Ever since I was little I always wondered why stores couldn’t just mark the price at $20 instead of $19.99, but now I see the psychological aspect of it and why it’s such a great idea. People would rather see $19.99 instead of $20 because they feel like they are getting it as a sale instead of paying full price, which really isn’t the case. Even if the price is lower by or or two pennies, people will feel more inclined to buy it at the cheaper price and therefore buy more of whatever the product is because they felt like they got a good deal. I worked at a grocery store for about 2 years and whenever there was a sale, even if it was 20 cents, people would go nuts and go out of their way o buy as much as they could of the product, even if they really didn’t need them all.
Although it may not seem like much, it absolutely has a huge effect on buyers. Having that penny difference is something that firms have been doing for years to get their products out, and statistically, it works! Even though it may sound crazy, even I can admit that i’d rather buy something at 19.99 rather than at 20.00 bucks. Why? I have no idea but i would. Even the stat that showed sales went up from when the price was 34.00 up to 39.00, it was because at 34.00, it doesnt look like such a good deal, but at 39.00, youre saying to yourself, “its not over 40 bucks, it sounds like a bargain to me. It’s such a strange phenomenon how our brains work, but statistically, no matter how crazy it sounds, those pesky little 9’s always get us to buy.
I believe that odd pricing works, although I never would have thought that a price ending in a 9 was so important and that more people would buy a $39 item than a $34 item. I do think it would be considerably more effective if tax was built into the price. Once you checkout and that $799.99 couch becomes an $800+ couch because of tax. If they built tax in, I think this pricing strategy would be a flawless strategy.
While no one wants to admit that psychological pricing strategies are designed to manipulate people, I think they most definitely do. The purpose of discount pricing is to persuade the customer into purchasing a product based on the fact that people read from left to right, which makes customers subconsciously believe they are receiving a discount. People really do believe they are getting a good deal with that one dollar or one cent taken off of the price. I can definitely agree to falling for this trick myself, if I see something for $19.99 than $20.00, it looks much cheaper to me because the price is still in the “teens” range rather than the “twenties”.
Psychological pricing is something that has been used for so many years because of one main reason… it works! I believe that most people do not take time to actually stop and think oh wow this couch is only $799 but if it was one whole dollar more I wouldn’t purchase it. All it does is gives the consumer a boost of confidence that they are getting a good deal with whatever they are buying and distracts them from actually realizing they are not actually saving money.
My family started an online eBay business a few years ago, and we have noticed customers were buying more when items were priced at $9.99 rather than $10. Psychological pricing pays a huge part in the marketing strategy, and surprisingly it works. Even though its only one penny, if you are buying multiple items, then these pennies add up! The consumer thinks they are saying money and receiving a good deal. As long as customers are returning to buy from my family’s business, we will continue using this strategy.
I do agree that odd pricing does work… just without even thinking about it when going shopping I would much rather spend $9.99 on something rather than $10 just because it feels like I am saving money. When in reality we all know we are only saving a penny. Psychological pricing is something that was thought of in my opinion to be used as a boost of confidence for people. It helps them to feel better about themselves and feel that they are saving money!
This has always drove me crazy! Thinking back now I wonder if I did fall into this psychological trick. I suppose that 99 does in fact sound significantly more appealing them 100, so I guess I have been tricked to some degree. I am not sure it is as significant when getting into larger number though, for example saying 799 makes the brain think of 700 instead of 800. While this may be true, if they are already willing to spend so many hundreds on a product does the 700 or 800 really make that big a difference? I guess it has more to do with the fact that the customer feels they are getting a better deal.