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Perceived prices as related to odd and even price endings
... Generally, odd pricing has been shown to increase people's perceptions of the value of a product, despite decreasing their perceptions of its quality. Lambert (1975) suggested that value is the ratio of quality to price. It can be inferred, then, that odd pricing decreases perceptions of price more than it decreases perceptions of quality, resulting in a higher value ratio. ...
... In this experiment, price was the only information participants had to evaluate the restaurant so it had a large effect on perceptions of its value. To explain this indirect price-value relationship, it is helpful to return to the notion of value as the ratio of quality to price (Lambert, 1975). Though it was found that participants believed the higher priced restaurant to be of better quality than the lower priced restaurant, they may have felt that the higher priced restaurant did not offer enough of a quality upgrade from the lower priced restaurant to make the price increase worthwhile. ...
... This result is in accordance with participants' ratings of the lower priced restaurant as a better value. Value perception takes into consideration perceptions of both price and quality (Lambert, 1975) and has been shown to be a good indicator of willingness to try (Dodds et al., 1991). ...
Consumers are often drawn to certain products and services by pricing techniques. Four versions of an Italian restaurant menu were created to test the impact of price level and price type on people's perceptions of a restaurant. Two versions were inexpensive while two were more expensive. Within each condition, one was odd priced, with prices ending in .49 or .99, and the other was even priced, with prices ending in .50 or .00. Participants reviewed one menu and completed a survey, assessing the restaurant's quality- image and value-image and their willingness to try it. In Experiment 1 there was no time limit, while in Experiment 2 participants were allowed only one minute to review the menu which was then taken away before they filled out the survey. In both studies, the analysis revealed that people believed higher priced restaurants offered higher quality but less value and that they were less likely to try them. Odd pricing had no effect on any of the dependent measures, highlighting the need for further investigation of the circumstances under which this technique impacts consumers.
... The first is the left-digit effect (LDE) or level effect, which suggests that humans tend to focus more on the left-hand digits and ignore or pay less attention to the rightmost digits since they process the price from left to right. This gives them the perception that the price of an object is lower than it actually is (Lambert, 1975;Gabor and Granger, 1979;Schindler and Kirby, 1997). This effect is also called the under-estimation effect or rounding-down effect (Bray and Harris, 2006). ...
... Although these experiments helped determine the characteristics of some consumer behaviors, they were not generalizable and the effects observed were not strong enough due to the studies' small sample sizes. Several other laboratory experiments (Georgoff, 1972;Lambert, 1975) focused on answering why consumers were affected by odd pricing. ...
... Georgoff (1972) Odd-ending prices do not affect sales 40 Lambert (1975) Customers ignore the rightmost digit, and round-ending prices down Drop-off effect 41 Gabor and Granger (1964) Respondents show greater intention to buy products with nine-ending prices compared to zero-ending prices Price sensitivity, low price effect et al., 2012). The quality image effect influences buyers to relate nine-ending prices with lower-quality products and round-ending prices with high-quality products (Stiving, 2000;Naipaul and Parsa, 2001;Schindler, 1991). ...
... In this case, the truncation causes the recognition of the most accessible number; in most cases, this is the zeroending number, which leads to the buyers' perceptual bias towards the lower price indicated by the leftmost digit (Schindler and Kirby, 1997). The drop-off effect suggests that consumers round down the price by ignoring the rightmost digits and overweighting the leftmost digit (Manning and Sprott, 2009;Schindler and Kibarian, 1993;Schindler and Wiman, 1989;Lambert, 1975). This effect suggests that buyers ignore or pay little attention to the ending digits of a price (Basu, 1997;Stiving and Winer, 1997). ...
Purpose- The discount image associated with odd-ending prices have led to its extensive usage by retailers. The purpose of this study is to do relative assessment of the impacts and applications of nine-ending and round-ending prices for the purchase of green and non-green products at different price levels and purchase motivations.
Design/methodology/approach- Three experiments were conducted. The first experiment was planned as a 2 (price endings: nine-ending vs. round-ending) x 2 (product appeal: green vs. non-green) between subjects study, the second experiment was planned as a 2 (price endings: nine-ending vs. round-ending) x 2 (price levels: low price vs. high price) x 2 (product appeals: green vs. non-green) between subjects study , and the third experiment examined the buyers’ preferences of price-endings for the purchase of green products having either utility (utilitarian) or pleasure (hedonic) motivations.
Findings- This research highlights that consumers prefer zero ending prices for the green products and pleasure motivation products, but they prefer odd endings for the low priced and utility products. The results recognize the increasing reception of round-ending prices. This study contributes by providing a boundary condition for odd ending prices. Specifically, the study finds that effect of nine-ending becomes weaker with the increase in the price of the products.
Research limitations/implications- The findings of the study have practical implications for managers as the results indicate that by pricing the green products and high-quality perception products in round digits, and pricing the low priced and utility perception products in odd digits would lead to increase in consumers’ purchase intentions. Moreover, pricing the products in round-ending would also help to reduce the perception of low quality and deter brand loyalty emanating from low price/discount image of a product.
Originality/value- This research contributes to theoretical and practical aspects of psychological pricing literature. This is the first study of its kind for exploring and comparing the impact of price endings on different green and non-green product categories. The study also resolves a contradiction in the past literature on the use of nine-ending prices by providing boundary condition.
... Previous researches showed that odd prices might have a positive impact on sales. The authors (G. A. Brenner, R. Brenner 1982;Holdershaw et al. 1997;Lambert 1975;Nagle, Holden 1995;Naipaul, Parsa 2001;Quigley, Notarantonio 1992;Schindler 1984Schindler , 1991Schindler, Kibarian 1993Schindler, Kirby 1997;Schindler, Wiman 1989;Stiving, Winer 1997) analyzed how odd prices impacted cognitive processes related to the information of a price and how these processes should increase the curve of demand. Guido and Pelluso (2004) say that an effect of the right number exists only due to consumers' interpretation. ...
... The original and most common explanation is related to underestimation of a price. Consumers tend to round these prices to down during perception (Alpert et al. 1984;Lambert 1975;Schindler 1984;Schindler, Warren 1988). Another explanation is related to the fact that consumers compare prices from left to right comparing two numbers among themselves (Monroe 1973). ...
This empirical paper analyzes the perception of odd prices in a Post-Soviet country. Two different streams of perception of odd prices are developed – a level effect and an image effect. The paper focuses on the latter effect. The authors analyze the perception of odd prices in different categories of products – convenience goods, clothes and domestic appliances. In addition, four different levels of a price were used in order to measure the perception of a price having various price levels. The results showed that Lithuanians have a different attitude about odd prices compared with the research in developed countries. At the same time the survey showed that the respondents’ experience related to odd prices fits the results of the research from developed countries. Moreover, the participants of the survey intuitively perceived odd prices as something negative and associated odd prices with cheating in the case of convenience products, or with discounted products in the case of shopping goods. This research demonstrates that companies should not practice nine-ending pricing widely since the respondents associated odd prices were preferred more in the case of cheap products (up to 10 LTL) than expensive products, and odd prices were related with discounted products in the case of shopping goods.
... Not only do the new technologies far surpass the capabilities that are available in traditional bricks-and-mortar stores to adjust their own prices (Kauffman and Lee, 2004) and track competitors' prices (Kauffman and Wood, 2004), they provide the basis for consumers to o 1 See Shapiro (1968) and Monroe (1990) for a review of earlier literature, and Anderson and Simester (2003) for a review of more recent literature in Marketing. 2 This is also referred to as odd pricing (Monroe, 2003), psychological pricing (Lambert, 1975), tantalizing pricing (Konieczny and Skrzypacz, 2003), and just-below-the-round-number-pricing (Schindler, 1984), and psychological price points and threshold pricing (Kashyap 1995) in Marketing and Economics. make to-the-cent price comparisons (Bakos, 1998). ...
... Prices that end in 9¢ or $9 are associated with price under-estimation by the consumer (Schindler and Kirby, 1997). Also called level effect theory by Stiving and Winer (1997), underestimation theory states that consumers round price numbers down due to limited memory capacity (Basu, 1997;Lambert, 1975). So, consumers may perceive an actual price of $999.99 as $999 or $990-or possibly even $900-instead of $1,000 (Shy, 2000). ...
Prior research shows that 9¢, 99¢, 99 in retail prices occur far more than expected. We investigate the extent to which these "'9' price-endings" occur in Internet-based selling, and explore what drives the observed variations. In particular, we explore theories based on customer perceptions of store quality image and rational inattention to price-endings. To accomplish this, we specify and test a discrete choice model for price-endings using more than 1.9 million daily observations on multiple categories of products sold by hundreds of Internet- based retailers. Our results show that a firm's online reputation, its average price in a product category, the relative price levels within a product category, and the total number of digits in the product's price have significant effects on the chosen price-endings with respect to different product categories. The results support an image theory of store quality, and suggest other behavioral and operations theories to explore in future work. We obtain mixed support for the theory of rational inattention. We also explore the role of information technology (IT) in firm price-setting, and offer new insights for marketers who wish to optimize price-setting decisions in the competitive online environment of Internet retailing.
... It means the retail advertisements of 9-ending prices connote a meaning of low-price or a discounted price to the Indian consumers and so they sometimes perceive the product's labelling with 9-ending prices on sale or special offer. The finding is consistent with many previous studies (Bliss, 1952;Lambert, 1975;Dodds and Monroe, 1985;Berman and Evans, 1986;Schindler and Wiman, 1989;Stiving and Winer, 1997;Schindler and Kirby, 1997;Schindler, 1991Schindler, , 2006Schindler and Kibarian, 2001;Guido and Peluso, 2004;Bizer and Schindler, 2005;Kleinsasser and Wagner, 2011;Choi et al., 2014;Quigley and Notarantonio, 1992;Mulky et al., 2014) however partially contradicts (Jeong and Crompton, 2018). MA image associated with the retail advertisements of 9-ending prices was found to show a significant positive impact on CPP. ...
... It means the retail advertisements of 9-ending prices connote a meaning of low-price or a discounted price to the Indian consumers and so they sometimes perceive the product's labelling with 9-ending prices on sale or special offer. The finding is consistent with many previous studies (Bliss, 1952;Lambert, 1975;Dodds and Monroe, 1985;Berman and Evans, 1986;Schindler and Wiman, 1989;Stiving and Winer, 1997;Schindler and Kirby, 1997;Schindler, 1991Schindler, , 2006Schindler and Kibarian, 2001;Guido and Peluso, 2004;Bizer and Schindler, 2005;Kleinsasser and Wagner, 2011;Choi et al., 2014;Quigley and Notarantonio, 1992;Mulky et al., 2014) however partially contradicts (Jeong and Crompton, 2018). MA image associated with the retail advertisements of 9-ending prices was found to show a significant positive impact on CPP. ...
... Over the past decades, several rationales have been proposed for the use of odd prices. The first one is the underestimation mechanism (Lambert, 1975), or level effect (Stiving and Winer, 1997). Consumers process prices from the left to the right digits (Hinrichs et al., 1982) and tend to minimize their information-processing effort so that they pay less attention to, or even ignore, the rightmost digits (Schindler and Wiman, 1989). ...
Purpose
This study aims to analyse the use of psychological pricing in online food retailing. In stationary grocery shops, psychological prices with nine-endings have been a well-documented phenomenon for many decades. However, little is known about the relevance of this pricing practice in the growing grocery e-commerce sector.
Design/methodology/approach
The authors investigate the frequency of nine-ending prices at Amazon Fresh for more than 10,000 products from May 2019 until March 2020 for the customer location Berlin, Germany. Applying a within–between logit model, the authors identify the determinants for the use of nine-ending prices.
Findings
The authors find that more than 70% of all prices end in the digit 9. This indicates that Amazon Fresh applies psychological pricing to a similar degree as traditional offline grocers. Nine-ending prices are more likely for so-called “want” products such as snacks and sweets than for “should” products such as fruits and vegetables. Also, psychological price endings are used less for products with a higher price level and for products with temporary sales promotions.
Originality/value
This study is the first to analyse psychological pricing practices for the world's largest online food retailer Amazon Fresh. The study results contrast with most previous empirical and theoretical studies, which suggest that the use of psychological prices would decline in an online context.
... In conclusion, studies carried out indicated that there was not a single reason for any price adjustment, but rather a great variety of theories (Liu et al., 2019;Cebollada et al., 2019;Salim et al., 2019;Wieseke et al., 2016;Hackl et al., 2014;Thomas and Morwitz, 2005;Bizer and Schindler, 2005;Schindler and Kibarian, 2001;Stiving, 2000;Gedenk and Sattler, 1999;Stiving and Winer, 1997;Schindler and Kirby, 1997;Schindler and Kibarian, 1993;Schindler and Wiman, 1989;Poltrock and Schawrts, 1984;Brenner and Brenner, 1982;Hinrichs et al., 1982;Lambert, 1975;Gabor and Granger, 1964) and factors to explain what has been observed ( Table 1). ...
Studies on demand impact for 9-ending and rounded prices have so far offered controversial results, with hardly any research focusing on their effect on online commerce or in a multichannel sales context. Our study aims to fill this gap by analyzing the conditions that influence the strategy behind setting such type of pricing in the multichannel retail business of fast-moving consumer goods (FMCG). To test the formulated hypotheses, scanner data from FMCG retailers are used. In addition to “demand” and “price”, “promotion communication”, “retailer type” and “price level” are included as moderators between 9-ending, rounded prices and demand. The results aim to provide, both in the academic and business fields, systematic findings of pricing relationships between online and offline channels which contribute to a better management strategy for “9-ending” and “rounded” prices.
Keywords: Prices; 9-ending Prices; Rounded Prices; E-Commerce.
JEL Classifications: M31, L81, C32
DOI: https://doi.org/10.32479/irmm.10683
... Un element important în cazul unor achiziţii de bunuri şi servicii turistice ar trebui să îl aibă teoria utilităţii tranzacţiei, care spune că respectivii clienţi sunt motivaţi de mult mai mult decît simpla utilizare asociată cu obţinerea şi întrebuinţarea unui produs [Zarrel,V.,L., 1975]. Utilitatea tranzacţiei motivează clienţii. ...
The intensity and aggressiveness of the pros and cons regarding the actual existence of a sexually oriented type of tourism, disregarding and periodically reconsidering it, its being assimilated rather with an illegal, immoral, underground and devastating activity in point of long-term community impact, generate a permanent opposition of opinions from theorists and practitioners in tourism, globally defining a process still unfinished and far from being crystallised, in contrast to a tourist reality that is profitable in some national economies. The paper tries to define this concept, to define its forms and to quantify its economic, social, moral and community impact, investigating Romanian reality to the largest extent possible. Some final remarks evince the theme of the general dialogue, trying to offer it to the guests of the conference and the readers of its volume of proceedings, as an approach that should be thoroughly analysed, with critical realism, in Romania too.
Key words: categories and typologies in tourism, sex tourism, community and moral tourism, Romanian tourism
... Na outra categoria, é exposto que os clientes arredondam os preços para baixo. A limitação das teorias é que elas não explicam por que razão os preços são arredondados para baixo e não para cima (GABOR; GRANGER, 1964;LAMBERT, 1975;SCHINDLER;KIBARIAN, 1993;ANDERSON;SIMESTER, 2003). ...
O presente estudo tem por objetivo analisar a relação entre a percepção de preços e a formação da intenção de recompra no varejo supermercadista, considerando os métodos de precificação baseados nas expectativas dos clientes. Para tanto, a trilha de investigação empregada se inspirou em uma abordagem de natureza descritiva e quantitativa para interpretação dos dados coletados por meio de um survey na internet. Os dados foram submetidos às técnicas estatísticas descritivas e inferenciais e, ainda, testaram-se hipóteses que foram analisadas por meio da ANOVA One-Way. Nos resultados, constatou-se que as estratégias de precificação voltadas para o baixo preço são mais efetivas no cenário do varejo supermercadista e que há uma relação não proporcional entre renda e decisão por menor preço.
... 'Nine ending pricing' practice, though devoid of any consistent logic, has continued to hold popularity among retailers. Some scholars such as Lambert (1975) stated that the theories on rational and informed behaviour could justify the widely prevalent practices of the odd-ending prices, however, there was persistent disagreement in the literature on why and what type Choi et al. (2014) 4 experiments Odd-ending pricing is preferred for hedonic consumption as a justification for guilt reduction Gamliel & Herstein (2011) 1 experiment Study failed to confirm prediction that people are loss averse and possibly waive the gain Khan & Dhar (2010) 3 experiments When discount is framed as saving on a hedonic item in a bundle rather than as an utilitarian item, then people show more purchase likelihood of cross-category bundle Mishra & Mishra (2011) 5 experiments Consumers prefer a bonus pack (a form of quantity-based offer) for healthy (virtue) foods, whereas price discounts are preferred for unhealthy (vice) foods Berkowitz & Walton (1980) 1 experiment Semantic cue 'percent off/now' was the only cue, being the most important in discriminating between groups, whereas other semantic cues -'total value' and 'regular' -were seen as approximately equivalent, with the 'compare at' cue evaluated slightly more positively than the others Chen et al. ...
Price framing helps businesses communicate utility and price to consumers in an attractive manner. The extant research shows that the price framing greatly impacts consumer’s choices of the price. Various scholars have analyzed it with varying perspectives. This review revisits and analyses each research work on price framing in the marketing domain from the time when price framing concept was formally introduced in the academic literature. The purpose of this review is to set future research agenda for academicians and practitioners based on the gaps in the literature. This review applies a systematic review approach to achieve the objectives. It uses a funnel approach for arriving at review time period, inclusion and exclusion criteria, and keywords of the study. This review conducts a co-word analysis using bibliometric software to categorize the major literature on price framing into major themes and subthemes. Twelve distinct categories of price framing research emerge after the analysis. The findings highlight how price framing was understood as a concept, discipline and practice in the past and the present business world.
... The literature suggests there are four different symbolic meanings that purchasers may attach to a 9-ending price. First, it has long been recognized that for many people a 9-ending price connotes a sale price, a low price, or a discount price (Berman & Evans, 1986;Bizer & Schindler, 2005;Bliss, 1952;Choi, Li, Rangan, Chatterjee, & Singh, 2014;Dodds & Monroe, 1985;Guido & Peluso, 2004;Kleinsasser & Wagner, 2011;Lambert, 1975;Quigley & Notarantonio, 1992;Schindler & Kibarian, 2001;Schindler & Kirby, 1997;Schindler & Wiman, 1989;Schindler, 1991Schindler, , 2006Stiving & Winer, 1997). More recently, for example, Schindler (2009) in an analysis of U.S. retailing advertisements empirically demonstrated that use of the 9-ending was considerably higher in advertisements that were promoting a discount, than in those for which no such claim was made. ...
h i g h l i g h t s 4 symbolic meanings associated with 9-ending prices were identified. There were no differences in their relative influence on purchase decisions in high and low-context cultures. No evidence that 9-endings influenced purchase-decision in the forced-choice questions between two different price-levels. In all three cultures, a 9-ending discount disproportionately increased the perceived value of a hotel room. a b s t r a c t Four symbolic meanings have been associated with 9-ending prices: Discount price, enhanced value, low quality, and misleading action. Scales were developed to measure each meaning and the relative strength of these meanings in influencing tourists' purchases among samples from the U.S., Korea and China was investigated. The analyses found no differences in the likelihood of tourists selecting 9-ending rather than even-ending prices when purchasing a sandwich, a pizza or show tickets; in their relative importance across cultures; or in the influence on purchase decisions of different symbolic meanings associated with 9-endings. However, a 9-ending discount was perceived to be more effective when compared to even-ended price discounts in the context of a hotel room. Again, however, its effectiveness could not be explained by the different symbolic meanings associated with 9-ending prices.
... See Carter and Manaster (1990) for an extended discussion of the importance of reputational capital effects in security markets. 6 See, for example, Twedt (1965), Lambert (1975), Brenner and Brenner (1982), Schindler and Kirby (1997), and Bizer and Schindler (2005). 7 Additional evidence of psychological pricing activity in real estate markets may be found in Allen and Dare (2004a, b) and Salter et al. (2007). ...
Using a sample of 26,892 rate quotes on home purchase loan applications, the current paper investigates interstate variation in residential mortgage interest rates. More specifically, we find posted rate quotes by lenders are directly related to measures of foreclosure process risk including the length of time required to complete foreclosure proceedings within a jurisdiction and the presence (and length) of statutory redemption
periods. Mortgage rates are also found to be contingent upon differential underwriting fees and conditions, housing appreciation and volatility measures, and the competitive nature of the economic marketplace in which each lender operates. In contrast to the previous literature, we find the judicial foreclosure process requirements exert little to no impact on observable mortgage interest rate quotes after controlling for these
additional dimensions of risk.
... In another experiment, 46 university students were given bundles of either odd prices or even prices to and were asked to quickly add the prices in their heads. On average, the students valued the odd-priced sets at 25% below the even-priced sets (Lambert 1975). Members of the general public are likely to be even more misled than college students. ...
Extensive and repeated testing of a wide variety of alternative reasonable hypotheses is necessary in order to increase knowledge about complex phenomena such as advertising. While non-experimental evidence is useful for less complex issues, laboratory and field experiments, as well as quasi-experimental studies, are needed to obtain useful knowledge about complex ones. Fortunately, much useful empirical research has been conducted on how to create an effective advertisement. A literature review, conducted over 16 years, summarized knowledge from 687 sources that included more than 3,000 studies. The review led to 195 condition-action statements (laws or principles) for advertising. Advertisers often fail to follow these principles, perhaps because they have not previously been available in a codified form. (We were unable to find the principles in a convenience sample of nine advertising textbooks; of the more than 6,500 references in these textbooks, only 24 overlapped with the 687 used to develop the principles.) By using these principles, practitioners can substantially increase advertising effectiveness. There are also opportunities for researchers. Relevant evidence-based papers were published at the rate of 20 per year from 2000 through 2009. The rate of knowledge accumulation could be increased via directed research (e.g., invited papers and business-sponsored research), and by publishing evidence-based research findings on the Internet.
... Insbesondere auf 9 endende Preise werden in diesem Zusammenhang in der Literatur hervorgehoben. Daneben finden auf 5 endende Preise und auffällige Preisendungen in der Literatur häufig Berücksichtigung (LAMBERT, 1975;MÖSER und HERR-MANN, 2006;SCHIND-LER, 2006;FENGLER und WINTER, 2007). ...
Price promotions play a prominent role in German grocery retailing. Their purpose is to increase store traffic and strengthen customer loyalty. It is hypothesized that other marketing tools, like psychological pricing can add to the positive impact of price promotions on sales. Thus, we investigate the joint impact of price promotions and different pricing points on sales. Our empirical analysis shows that just-below prices tend neither to raise sales of regularly priced products nor of price promoted products. The only exception is significant price reductions combined with 99 ending prices (especially of private labels). While our results show no alternatives to regular 9 ending prices, price promotions should rather end in a 99 or be round. Moreover, repdigits (eye-catching price figures) can significantly increase sales of price promoted manufacturers' labels when other cues of price promotions exist. However, German retailers, particularly discount stores, do rarely make use of such combined marketing tools. The results indicate that consumers pay less attention to the size of price reductions than to other cues of price promotions or displays, whereby psychological pricing can intensify the impact of other marketing tools on sales.
... Da mesma forma, um preço de $105 tenderá a aparecer para os consumidores como tendo um adicional de $5 relativamente a $100. Esta hipótese tem recebido confirmações de experimentos feitos (Lambert, 1975 e Smith e Nagle, 1995). Estas são algumas aplicações que a Teoria dos Prospectos busca chamar a atenção e sistematizar na descrição do comportamento do consumidor, oferecendo inputs relevantes para decisões gerenciais de marketing. ...
... According to the underestimation hypothesis, consumers tend to perceptually underestimate the cost of a good or service by minimizing cognitive effort through truncating, rather than rounding, prices. Therefore, a consumer will perceive a product priced at $9.99 to be " $9.00 " or " $9.00 and some change " by dropping off the rightmost digits rather than rounding the price up to $10.00 (Stiving and Winer, 1997; Lambert, 1975). Truncation is believed to be a result of consumer's limited capacity for storing directly accessible information, in which case consumers only store the valuable parts of a message they receive (Brenner and Brenner, 1982). ...
Purpose
Using adaptation‐level theory as a conceptual framework, the purpose of this research is to determine what effect, if any, marketplace conditioning has on consumer price estimates and product evaluations.
Design/methodology/approach
A total of 475 subjects participated in two experiments that required them to read a scenario, evaluate a series of advertised products, and perform an aided price recall task.
Findings
The results suggest consumers are more likely to recall the correct price when more of the rightmost digits end in 0 or 9. Moreover, when prices are incorrectly recalled, consumers are likely to inadvertently assume prices end in commonly used rightmost digits (i.e. 5 and 9). Combined, the results demonstrate odd pricing effects are likely a result of marketplace price conditioning rather than truncation of rightmost digits as suggested by the analog model of numerical cognition.
Practical implications
Findings suggest that use of atypical rightmost digits in odd prices fails as a method to differentiate products in the mind of the consumer. This would explain the use of larger right ending digits by retailers in an effort to maximize profit without impacting consumer perceptions of quality, value, and purchase likelihood. In the absence of strong quality image effects, retailers are encouraged to continue the practice of setting prices with digits ending in 9.
Originality/value
A key theoretical implication of this study is that the underestimation heuristic based on leftmost digit processing fails to explain the results of the incorrectly recalled price estimates. As a result, adaptation‐level theory may provide a more robust explanation for odd pricing effects.
... See Carter and Manaster (1990) for an extended discussion of the importance of reputational capital effects in security markets. 6 See, for example, Twedt (1965), Lambert (1975), Brenner and Brenner (1982), Schindler and Kirby (1997), and Bizer and Schindler (2005). 7 Additional evidence of psychological pricing activity in real estate markets may be found in Allen and Dare (2004a, b) and Salter et al. (2007). ...
Using a sample of 26,892 rate quotes on home purchase loan applications, the current paper investigates interstate variation in residential mortgage interest rates. More specifically, we find posted rate quotes by lenders are directly related to measures of foreclosure process risk including the length of time required to complete foreclosure proceedings within a jurisdiction and the presence (and length) of statutory redemption periods. Mortgage rates are also found to be contingent upon differential underwriting fees and conditions, housing appreciation and volatility measures, and the competitive nature of the economic marketplace in which each lender operates. In contrast to the previous literature, we find judicial foreclosure process requirements exert little to no impact on observable mortgage interest rate quotes after controlling for these additional dimensions of risk.
... In another experiment, 46 university students were given bundles of either odd prices or even prices to and were asked to quickly add the prices in their heads. On average, the students valued the odd-priced sets at 25% below the even-priced sets (Lambert 1975). Members of the general public are likely to be even more misled than college students. ...
Complex phenomena such as advertising are difficult to understand. As a result, extensive and repeated testing of diverse alternative reasonable hypotheses is necessary in order to increase knowledge about advertising. Laboratory and field experiments, as well as quasi-experimental studies, are needed. Fortunately, much useful empirical research of this kind has already been conducted on how to create persuasive advertisements. A literature review, conducted over 16 years, summarized knowledge from 687 sources that covered more than 3,000 studies (Armstrong 2010 https://link.springer.com/book/10.1057/9780230285804 https://a.co/d/hqxj4Ij). The review led to 195 principles (condition-action statements) for advertising. We were unable to find any of them in a convenience sample of nine advertising textbooks. The textbooks tended to ignore evidence on persuasion. Of the more than 6,500 sources referenced in these textbooks, only 24 overlapped with the 687 used to develop the principles. By using the evidence-based principles, practitioners may be able to increase the persuasiveness of advertisements. Relevant evidence-based papers have been published at the rate of 20 per year from 2000 to 2010. The rate of knowledge accumulation could be increased if journal editors invited papers with evidence-based research findings.
... Two possible mechanisms are utilized to explain why odd-pricing may be effective in creating a perception that a product is less expensive. One is the underestimation mechanism (Georgoff, 1972;Lambert, 1975). This theory proposes that because numbers are read from left-to-right, the numbers to the right tend to be ignored since they are of lesser significance than the numbers to the left and, as a result, consumers tend to round prices down (Hinrichs et al., 1982;Poltrock and Schwartz, 1984). ...
Price-ending strategies may be utilized by hotels to signal value or quality. The current study presents that there is a directional relationship between room rates and price-ending strategies. It demonstrates that as average room rates decrease, the price-ending strategies change from whole dollar practice to dollar and cents practice. Results from the qualitative investigation were compared with the room rates from the Internet for 10 US cities. Based on this study, an innovative pricing strategy is presented with a potential gain of 555 million if estimated liberally) annually for the hotel industry in the USA. These potential sales are about 0.54% of revenues and 3.9% of industry-wide pre-tax profits. Further studies in consumer acceptance of the recommended pricing strategy are suggested.
... The first group suggested that consumers analyze prices from left to right, stopping analysis once a difference is detected, essentially rounding down 9-ending prices (e.g. Bizer and Schindler, 2005, Gabor and Granger, 1964, Lambert, 1975, Schindler and Kibarian, 1993, Schindler and Kirby, 1997, Schindler and Wiman, 1989. These authors supported the propositions that suggested a lack of analysis of price endings, a premise that was opposed by the second group of researchers who suggest that consumers discern meaning from the price ending used (e.g. ...
Purpose
To investigate the area of price endings to determine which groups of consumers are more likely to use odd‐endings as opposed to round‐endings.
Design/methodology/approach
A questionnaire was developed that tested respondents' use of odd‐endings as opposed to round‐endings dependent on classification by gender and age. Respondents were required to estimate the price they would be expected to pay in stores for six products. This methodology enabled the researchers to generate a large sample size and to encourage accuracy of response.
Findings
The main finding was that there was a difference between gender groups; women were more likely to respond with odd‐endings than men and hence segmenting the market is the way forward when investigating price endings.
Research limitations/implications
The research only considers segmentation by gender and age. Further research needs to be undertaken to fully understand the consumer responses.
Practical implications
Although the difference between 99 cents and a $1.00 is small, for high volume items this can have a significant impact on gross profit and margins, particularly for low value items. If retailers understand which groups of consumers were more likely to be attracted to the round‐endings they could use this knowledge to determine the most effective prices.
Originality/value
This research follows on from a price trial conducted into price endings and is the second phase of an investigation into whether odd‐endings are effective. It proposes a theory that has been empirically tested and points the way forward for future research in this area.
Resumo Este artigo tem como objetivo analisar as atitudes face às promoções de vendas no contexto dos produtos alimentares comprados em super e hipermercados. Serão analisados neste trabalho aspetos que direta ou indire-tamente podem estar relacionados com este fenómeno: por um lado a sensibilidade face ao preço e à qualidade e, por outro, a compra impulsiva. Para analisar este fenómeno junto do consumidor foi utilizado um questionário administrado a uma amostra não probabilística por conveniência de 131 elementos. Dos resultados obtidos destaca-se que a "Atitude face às promoções" é positiva e que existem correlações en-tre as variáveis "Sensibilidade ao preço", "Sensibilidade à relação qualidade-preço", "Impulsividade na compra" e a "Atitude face às promoções".
Resumo Este artigo tem como objetivo analisar as atitudes face às promoções de vendas no contexto dos produtos alimentares comprados em super e hipermercados. Serão analisados neste trabalho aspetos que direta ou indire-tamente podem estar relacionados com este fenómeno: por um lado a sensibilidade face ao preço e à qualidade e, por outro, a compra impulsiva. Para analisar este fenómeno junto do consumidor foi utilizado um questionário administrado a uma amostra não probabilística por conveniência de 131 elementos. Dos resultados obtidos destaca-se que a "Atitude face às promoções" é positiva e que existem correlações en-tre as variáveis "Sensibilidade ao preço", "Sensibilidade à relação qualidade-preço", "Impulsividade na compra" e a "Atitude face às promoções". Abstract: This article analyzes the attitude towards sales promotions in the context of food bought in supermarkets and hypermarkets. In this study were examined aspects that may be directly or indirectly related to this phenomenon: on one hand the awareness of price and quality and, secondly, the buying impulse. To analyze this phenomenon, was used a questionnaire administered to a non-probabilistic convenience sample of 131 elements. From our results we emphasize the "Attitude towards promotions" because it's positive, and that there is positive correlation between the variables "sensitivity to the price", "Sensitivity to the relation price-quality", "Impulsivity" and "Attitude towards promotions".
Marketers' proclivity for just‐below prices (e.g., 10.00). The literature, however, lacks a comprehensive assessment of when and how price endings matter. Three mechanisms might explain price‐ending effects on consumers' purchase decisions: just‐below prices (1) improve price perceptions, but (2) impair perceived product quality, and (3) cause consumers to underestimate prices. A preregistered meta‐analysis ( k = 69 studies, m = 362 effect sizes, N = 40,541) established that just‐below (vs. round) prices tend to increase purchase decisions ( g = 0.13, CI 95% [0.01, 0.25]), result in an advantageous price image ( g = 0.28, CI 95% [0.09, 0.48]), have no effect on perceived product quality ( g = 0.00, CI 95% [−0.17, 0.18], p = 0.96), and are more often underestimated ( g = 0.67, CI 95% [0.04, 1.30]). Participant, study, price, and product characteristics moderate the magnitude of these effects. Overall, the effect sizes are small and highly heterogenous, p ‐curve analyses revealed a large proportion of nonsignificant effects, and publication bias corrections suggest smaller and, at times, nonsignificant true effects. We discuss theoretical and applied implications for the pricing literature.
Most prior studies of just-below pricing have primarily focused on low-stakes inconsequential consumer purchases, such as everyday household items. Using data from the Multiple Listing Service for the city of Savannah, Georgia, from 2006 through 2021, this study extends the more limited research on just-below pricing for more consequential purchases, specifically housing. Beyond an examination into the general effectiveness of just-below pricing in real estate, this study also explores the heterogeneous effects of its usage on sale price during different market conditions and in different market segments. The study shows that just-below pricing is common in the real estate market, and it does have an impact on final sale price, working most effectively within cold real estate markets. Furthermore, it is found that just-below pricing works best (though it is utilized least often) within low-end price segments, while just-below pricing can work against the seller in high-end home price segments (though it is used most often in these segments).
Resumo
Este artigo tem como objetivo analisar as atitudes face às promoções de vendas no contexto dos produtos alimentares comprados em super e hipermercados. Serão analisados neste trabalho aspetos que direta ou indire-tamente podem estar relacionados com este fenómeno: por um lado a sensibilidade face ao preço e à qualidade e, por outro, a compra impulsiva. Para analisar este fenómeno junto do consumidor foi utilizado um questionário administrado a uma amostra não probabilística por conveniência de 131 elementos. Dos resultados obtidos destaca-se que a "Atitude face às promoções" é positiva e que existem correlações en-tre as variáveis "Sensibilidade ao preço", "Sensibilidade à relação qualidade-preço", "Impulsividade na compra" e a "Atitude face às promoções".
Abstract:
This article analyzes the attitude towards sales promotions in the context of food bought in supermarkets and hypermarkets. In this study were examined aspects that may be directly or indirectly related to this phenomenon: on one hand the awareness of price and quality and, secondly, the buying impulse. To analyze this phenomenon, was used a questionnaire administered to a non-probabilistic convenience sample of 131 elements. From our results we emphasize the "Attitude towards promotions" because it's positive, and that there is positive correlation between the variables "sensitivity to the price", "Sensitivity to the relation price-quality", "Impulsivity" and "Attitude towards promotions".
A lot of physicists and economists have contributed to studies showing analogies between physical complex systems and economic and financial markets. In this paper we have compared the complex system of earthquakes with Internet, social media and finance. In particular, we have observed as Omori’s law conforms in both to the evolution of the tweets and to the securities exchanged on the financial market after dissemination of information. The analysis of empirical data concerns companies operating in the market. We have tested the relationships between variables through Person correlation coefficient and the relationship between phenomena with power trend-lines. We show that these complex financial systems follow a specific law that is related to the Omori’s law.
Recent literature shows that in the US gasoline prices are higher in locations using more odd prices (particularly those ending in five and nine digits), since they coarse the pricing grid and act as a focal collusive point. We replicate this analysis for the Italian market, obtaining the opposite result. Since the rightmost digit of the retail gasoline prices in Italy is the third and not the second decimal place, coarsening the pricing grid is not sufficient to support a collusive behaviour.
Guten Tag, mein Name ist … Ich komme von der Johann Wolfgang Goethe-Universität Frankfurt, Professur für Marketing.
Retailers have been criticized for heavily relying on odd prices although their advantage over even prices has not been convincingly proven. In this paper we argue that such behavior does not have to stern solely from tradition, but may be seen as a rational way of dealing with uncertainty.
We review 22 empirical studies on the effects of odd versus even prices and find that the results are inconclusive as to whether threshold effects exist. In an analysis of profit contributions we then show that in the light of such uncertainty it is rational to set odd prices. The reason is that only small losses in profit contribution are incurred when odd prices are set although no thresholds exist. In the opposite case, however, losses can be quite substantial. Results of a response surface analysis show the size of the two errors for a wide range of response parameters.
This study examines the dimensions consumers use to perceive odd and even prices. A-priori dimensions were developed to measure these perceptions. Subjects were shown ads for low, medium and high-priced products that were either even or odd- priced. They were then asked to respond to a series of questions designed to measure perceptual dimensions. A factor analysis was performed to evaluate the a-priori dimensions. The results confirmed these dimensions.
The strategy of odd pricing, although common among retailers, has not received much attention from researchers. This study explores the perceptions of test subjects of odd and even prices at various price levels. Differences in perceptions were found in both high and medium price level products which were priced odd and even. Managerial implications are discussed and future research questions are developed.
This study empirically investigates the theory that odd‐numbered pricing points can be used as focal points to facilitate tacit collusion. Like other retailers, gasoline stations in the United States disproportionately sell at prices ending in odd digits. I show that station prices are higher and change less frequently in locations using more odd prices (particularly those ending in 5 or 9), even after controlling for other market characteristics. The evidence suggests that the use of pricing points can be an effective mechanism for tacitly coordinating prices, providing an alternative explanation for the widespread use of odd prices in retail markets.
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 field-experimental 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.
Retail prices typically end in 9 cents. This can be due to thresholds between odd and even prices where sales decrease sharply (e.g., 2.90). However, empirical evidence is inconclusive as to whether such thresholds really exist. We show that observed retailer behavior is rational even when there is uncertainty about the existence of price thresholds. Our analysis is based on the losses in profit contribution that are incurred when a retailer makes the wrong assumptions about the presence of thresholds. By analyzing different response and cost functions, we find that a retailer should typically set 9-ending prices, unless he suspects strong quality-image effects of price endings.
Through the cooperation of a direct-mail women's clothing retailer, we were able to conduct a well-controlled experiment testing the sales effect of using retail prices that end in the digits 99 rather than 00 (e.g., 30.00). The results indicated that the use of 99 endings led to increased consumer purchasing. This finding demonstrates the importance of the manager's decision concerning a price 's rightmost digits. © 1996 New York University. All rights of reproduction in any form reserved.
Purpose
– The purpose of this research is to test for price threshold effects in the demand for high-involvement services for small businesses.
Design/methodology/approach
– The authors use a stated preference choice-based conjoint study of small business telecommunications demand. Using survey data, individual-level parameter estimates for a demand model are achieved via the Hierarchical Bayes method of estimation.
Findings
– For demand for small business telecommunications services, the authors find very strong positive impacts of nine-ending and zero-ending prices on the demand for a common bundle of telecommunications services (wired telephone service, broadband internet, and cellular telephone service), even at prices so high a shift in the left-most digit does not occur.
Practical implications
– The advertising, brand, or product manager or statistician who assumes threshold effects are not extant in high-involvement service demand may find conventional demand estimation methods lead to erroneous conclusions and less effective pricing strategies.
Originality/value
– In the statistical literature on price-ending effects on product demand, most products for which demand is modelled are low-involvement consumer products priced at less than ten monetary units per unit of product. There is a lacuna in this price-ending effects literature regarding small businesses and high-involvement services offered at three-digit prices via monthly subscription. This research indicates that testing for threshold effects should be de rigeur in the methodology of demand estimation for telecommunications or other high-involvement services.
This study, using Kahneman and Tverskys Prospect Theory as the theoretical reference, discussed and tested, in an experiment, the concept, and determinants, of the reference price in buying decisions. The reference price was defined as the price that the buyer adopts as a basis to evaluate the price effectively charged for the product. The experiment also evaluated managerial experience in marketing as a variable capable of reducing the influence of those determinants. The results are in line with evidences from other studies and indicate that the way the decision is presented influences the buyer´s perception over the reference price. The variable managerial experience in marketing had a partial influence in reducing the impact of the factors investigated over the subjects perception of prices.
Previous studies show that because of cognitive reference points, managers tend to conduct a particular kind of earnings management to affect the cognition of users of financial information. In order to examine whether this kind of earnings management exists in Chinese companies, this paper conducted a survey on the related financial data of 1,443 listed companies in Chinese A-share market. The results show that this earnings management based on cognitive reference points also exists in Chinese companies.
The object of the present contribution is to analyse the pricing practice of retailers in terms of the psychology of prices and to point out ways of applying this to pricing in euros. In the first place it is shown what price figures retailers currently favour, and then it will be demonstrated how they can adapt the translated prices in line with desired optical effects. For this purpose a rounding-model is developed on the basis of a random sample. It is discussed, how the model can be used to adjust the price-level due to Strategie reasons. On the tactical level it is discussed, how compensatory pricing can be used to take competition into aecount.
Research in marketing indicates that consumers may be sensitive to the final digits of prices. For example, despite being substantively equivalent, a price such as 200. However, existing research has primarily focused on the effects of price endings in the context of uni-dimensional prices – prices consisting of a single number. Advertised prices in the marketplace are often multi-dimensional, consisting of numerous price dimensions. In such pricing contexts, price endings may influence consumers’ ability to conduct the arithmetic required to compute the total advertised price. Examines the effect of various price ending strategies on consumers’ computational efforts. The findings indicate that the more commonly exercised price ending strategies tend to result in prices that are the most difficult for consumers to evaluate.
The current study investigates odd-even psychological pricing with the aid of a Price endings and Consumer Behavior (PCBM) Model for the hospitality industry. The PCBM proposes that a reciprocal relationship exists between hospitality marketers and consumers with reference to 00 and 99 price ending practices. Theoretical support for the posited model is provided by signaling theory, a persuasion knowledge model (PKM), and learning by analogy from marketing and psychology literatures. Results indicate that consumers use intuition and knowledge gained from interacting in the retail marketplace to respond to the intentions of hospitality marketers’ odd-even psychological pricing strategy. After repeated exposures to odd-even pricing, consumers learn to accept the 00 and 99 pricing endings as extrinsic cues for quality and value and as pricing norms of the hospitality industry.
This study used choice modelling to estimate the effect of odd pricing on the demand for three products: a 7 block of cheese, and a 3.18 for the kettles. The results of the study provide empirical support for the assumption that odd pricing generates greater-than-expected demand, at least at the individual brand level, and for the common practice of setting retail prices that end in 95 cents or 99 cents.
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