The effect of odd pricing on demand

Gendall, Philip; Holdershaw, Judith; Garland, Ron

doi:10.1108/03090569710190541

Cited by 52 publications

(52 citation statements)

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“…(e.g., Bhattacharya et al 2012;Gendall 1998), others cannot identify significant differences between just-below and round prices with regard to sales outcomes (e.g., Gendall et al 1997). Tentative evidence even supports the assumption that consumers prefer round prices (Lynn et al 2013) and that round prices increase sales (Bray and Harris 2006).…”

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confidence: 82%

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

Wieseke

Kolberg

Schons

2015

J. of the Acad. Mark. Sci.

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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.

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confidence: 82%

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

Wieseke

Kolberg

Schons

2015

J. of the Acad. Mark. Sci.

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“…Schindler and Kirby (1997), Stiving and Winer (1997) and Schindler (2009) observe that up to 65% of all prices end with a digit-nine in the USA. Gendall et al (1997) finds the same in New Zealand. Suri et al (2004b) finds the same in European markets such as Poland and Finland (Aalto-Setala, 2005).…”

Section: Literature Reviewsupporting

confidence: 52%

The impact of psychological pricing strategy on consumers' buying behaviour: a qualitative study

Kumar

Pandey

2017

IJBSR

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Abstract:The recognition of consumers' behaviour is crucial for effective marketing plans. Evidences explain that the psychological pricing communicates meaning to consumers. This study theoretically examines the impact of psychological pricing on consumers' buying behaviour. The study has used secondary data from research papers, monographs, theses, popular articles, and newspapers. Findings show that socio demographic factors like age, income, education, gender, lifestyle, family size, reference groups, social roles and status and the psychological patterns like representativeness, availability of products and the anchoring heuristics are key factors which influence consumers' buying behaviour. Additionally, the consumers, who are more price cognisant are more probable to select nine-ending prices. Indeed, low involved customers, those with a small hedonic and symbolic attachment profile, low educated, low income and younger customers are prone to select the nine-ending priced products and services. The findings can have implications for retailers, pricing managers, researchers, academicians, society and government.

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“…Laboratory experiments, in general, have to rely on purchase intentions instead of actual demand. An example of such an experiment is Gendall et al (1997), suggesting that 9-ending prices affect purchase intentions positively.…”

Section: Empirical Evidencementioning

confidence: 99%

99 Cent: Price points in e-commerce

Hackl¹,

Kummer

Winter‐Ebmer

2014

Information Economics and Policy

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10022.pdf 99c: Price-Points in E-Commerce: Non -Technical SummaryThis paper attempts to shed light on the pricing behaviour of firms or sellers in market places with price competition. In particular, it aims at testing the mechanism that lies at the heart of one of the most famous models in economics, namely the Bertrand model of competition. This model suggests that firms' profits will be zero as soon as there are at least two sellers in the market. The model is built on the idea that consumers will go to the cheapest shop, even if the differences in prices are "infinitesimal". As a result, firms are tempted to undercut their opponents' price by a small amount and they do so over and over until they end up charging the cost at which they produce their products.However, the underlying assumption is at odds with the observation that consumers typically do not care very much about a single cent and the predicted outcome clearly goes against the fact that many prices end in 99c. If sellers really charged the price at which they buy or produce a good or a service, we should observe all possible price endings. Basu (2006) argues that the prevalence of 99 cent prices in shops can be explained by rational consumers who disregard the rightmost digits of the price. This "bounded rational" behaviour leads to an Bertrand equilibrium with positive mark-ups allowing firms to make at least small profits.We use data from an Austrian price comparison site, which bears the advantage that in such an environment other factors than price both can be observed online and play a minor role. Price comparison sites are therefore highly suited for our test.We find results highly compatible with Basu's theory. We can show that price points -in particular prices ending in 9 -are more frequent than other endings and have significant impact on consumer demand. This shows that the mechanism that was postulated by Bertrand is not in place. Consumers do not necessarily choose the cheapest price and they even less do so when the Euro digits of the price are the same (i.e. when the difference is small). Moreover, the nine-ending prices are sticky: neither the price-setter itself wants to change them nor the rivals do underbid these prices, if they represent the cheapest price on the market. This might either show that shops seem to believe that it is no use to only slightly undercut a rival's price if this do...

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The effect of odd pricing on demand

Cited by 52 publications

References 13 publications

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

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

The impact of psychological pricing strategy on consumers' buying behaviour: a qualitative study

99 Cent: Price points in e-commerce

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