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

Abstract

Retailers are increasingly using round prices, a trend at odds with the marketing belief in the superiority of just-below prices. However, conclusive empirical evidence on the effectiveness of different price endings is still missing. Addressing this void, this paper presents four fieldexperimental studies with a broad array of samples revealing the central role of convenience in the context of price endings. Findings indicate that consumers perceive round prices as more convenient because their high cognitive accessibility saves time and effort during transactions, which is corroborated using a reaction time measure. Accordingly, round prices increase sales in purchase situations characterized by a high importance of convenience. Further, consumers' convenience consciousness explains preferences for different price endings. This research thus contributes to the behavioral pricing literature by challenging traditional marketing beliefs and providing convincing evidence of the superiority of round prices in a complex world where many customers attach great importance to convenience.

Incidence and Magnitude of Quantity Surcharges and Quantity Discounts in Online Shopping

“…In order to assess if the format of the price influences the depth of quantity discounts and incidence of quantity surcharges, each price was categorized as either even (e.g., $20.00), odd (e.g., $19.95, $19.98, $19.99), or irregular (e.g., $17.63), consistent with the standards used in earlier studies on price endings (Manning and Sprott ; Schindler and Kirby ; Stiving and Winer ; Wieseke, Kolberg, and Schons ). It is important to note that the designation of a price as “odd” is consistent with the terminology used in the price‐ending literature and simply reflects the fact that the price is just below round values, not necessarily that it is numerically an odd figure (Estelami ; Wieseke, Kolberg, and Schons ). In total, 48.3% of the prices were irregular, 49.6% were odd, and 2.1% were even.…”

“…Research in behavioral pricing shows that the use of specific price formats inhibits computational abilities of consumers (Bhattacharya, Holden, and Jacobsen 2012;Estelami 1999Estelami , 2003Wieseke, Kolberg, and Schons 2016). Cognitive tasks such as division and multiplication become significantly more demanding when price is communicated using irregular figures that cannot be rounded (e.g., $167), compared to when they are round (e.g., $200) or can be easily rounded (e.g., $198, $199).…”

“…These cross-category differences, tested using chi-square analysis, are significant ( 2 = 7.82; Φ = 0.18; p < .01), suggesting that the incidence of quantity surcharges varies across product categories, with the highest incidence rates evident for paper, shaving blades, light bulbs, coffee, and coffee filter. In order to assess if the format of the price influences the depth of quantity discounts and incidence of quantity surcharges, each price was categorized as either even (e.g., $20.00), odd (e.g., $19.95, $19.98, $19.99), or irregular (e.g., $17.63), consistent with the standards used in earlier studies on price endings (Manning and Sprott 2011;Schindler and Kirby 1997;Stiving and Winer 1997;Wieseke, Kolberg, and Schons 2016). It is important to note that the designation of a price as "odd" is consistent with the terminology used in the price-ending literature and simply reflects the fact that the price is just below round values, not necessarily that it is numerically an odd figure (Estelami 2003;Wieseke, Kolberg, and Schons 2016).…”

“…Consumers' lack of awareness of quantity surcharges can be a result of their limited ability to process price information (Cude and Walker ; Sprott, Manning, and Miyazaki ), conduct the necessary mental arithmetic (Estelami ; Wieseke, Kolberg, and Schons ), and arrive at optimal purchase decisions. However, in addition to the information processing explanation for the existence of quantity surcharges, the phenomenon may be related to sellers' desire to segment the market and price the products such that those consumers who are more in need of larger volumes of the product pay higher unit prices.…”

Impact of different price discount frames and levels on customer perception and behavioural intention

“…A wide range of studies claim that not only price discount has a certain impact on customer perception, but also the frame − in percentage (relative) or monetary (absolute) terms discount is presented (Biswas & Graw, 2008;Gamliel & Herstein, 2011;Gendall, Hoek, Pope, & Young, 2006). It has been found that framing the same price discount in a different way can influence customer perceptions related to the attractiveness of promotion (Munger & Grewal, 2001;Wadhwa & Zhang, 2015;Wieseke, Kolberg, & Schons, 2016), and may also influence purchase decision (Nusair et al, 2010). Some studies suggest that discount frames result in higher purchase intentions (González et al, 2016), whereas other research indicates that the discount format has no impact on purchase intentions (DelVecchio, Krishnan, & Smith, 2007) or results are mixed (Isabella, Pozzani, Chen, & Gomes, 2012;McKechnie, Devlin, Ennew, & Smith, 2012).…”