Hospitality Managers’ Price-Ending Beliefs

Abstract

The use of “just-below” pricing (such as pricing an item at $6.99 or $6.95, rather than $7.00) has been common in some segments of the hospitality industry (such as quick-service and mid-scale dining). The results of a detailed survey of the price-ending beliefs of hospitality managers show that many believe that just-below prices connote good value and round-number prices connote high quality. Furthermore, the majority of these managers believe that consumers tend to drop off or otherwise give insufficient consideration to a price’s rightmost digits. Although one might expect this drop-off belief among those managers who use just-below price endings, it is found also in a majority of those managers who do not use just-below price endings. The survey results suggest that managers who decline the benefits of a consumer drop-off tendency do so because they also believe in one or more possible negative consequences of using just-below price endings. These include the beliefs that just-below endings (1) impair perceptions of high quality, (2) work against an upscale image, (3) give an impression of not being fully honest or straightforward, and (4) involve inconvenience in calculating or communicating the price or in making change.

Life could be so easy: the convenience effect of round price endings

“…Just-below prices dominate in Western retail (e.g., Levy et al 2011;Schindler et al 2011;Suri et al 2004;Twedt 1965), with round prices occasionally used to signal high quality (Parsa and Naipaul 2007;Schindler 2006;Stiving 2000). However, little empirical evidence supports this practice, and prior research on price endings has produced vastly differing results.…”

“…The price image attached to just-below endings is usually that of a low or discount price (Schindler and Kibarian 2001;Schindler 1991) that has been reduced or at least not increased recently and that is the lowest price around for this product (Stiving and Winer 1997;Schindler et al 2011). Price endings also imply meaning regarding the product's quality image.…”

“…In addition, round prices also reduce the time needed to close a transaction in the case of cash transactions. Round prices require fewer separate pieces of money than any other price ending (Knotek 2010), simplify the process of giving change (Schindler et al 2011), and thus accelerate the process of paying. In the extreme case, the customer can complete the transaction by handing over one coin to the seller without waiting for change at all.…”

The Round‐Number Advantage in Consumer Debt Payoff

“…Given our finding that the greater mental convenience of round numbers can benefit the creditor in debt repayment situations, it is possible that the cognitive ease associated with round numbers plays a similar role in retail pricing (Wieseke et al., 2016). Whereas prior research has suggested that round numbers are disproportionately represented in retail prices because they signal high quality (e.g., Schindler et al., 2011; Stiving, 2000), this may not be the only reason for their high incidence. Round‐number prices may also be favored because they are easier for the retailer to generate and manage and because of retailers’ correct intuition that round‐number prices are easier for consumers to process and remember, which could lead to consumers becoming more likely to buy.…”

Left-Digit Effect in Tourists’ Price Evaluations: The Moderating Role of Price Level and Composite Price

“…Although there is no shortage of anecdotal evidence that supports the effectiveness of 9-ending pricing, there is a lack of consensus regarding the theoretical explanations of this phenomenon. Past research has proposed two major psychological theories: image effects, which focus on the effect of the rightmost digit, and left digit effects, which focus on the effect of the leftmost digit (Stiving and Winer 1997; Hackl, Kummer, and Winter-Ebmer 2014; Schindler, Parsa, and Naipaul 2011).…”