Odd pricing (also called - Psychological pricing, Price Ending, Charm Pricing) is a pricing & marketing strategy based on the theory that certain prices have a psychological impact on the buying behavior of the customers.
You would have seen that the sale-prices are often expressed as odd-number prices i.e. a little less than a round number, e.g. $19.99 or £2.99.
1.
There's evidence that consumers tend to perceive “odd-number prices” as being significantly lower than they actually are, tending to round to the next lowest monetary unit.
Thus, prices such as $1.99 are associated with spending $1 rather than $2.
2.
Fractional prices suggest to consumers that goods are marked at the lowest possible price.
When prices end in an odd way, say $39, customers tend to believe that the product is priced at a discount (maybe at $1 or $11).
On the other hand, rounded numbers convey an impression that the retailer is padding the price with a big fat margin.
According to a 1997 study published in the Marketing Bulletin,
Example:
You would have seen that the sale-prices are often expressed as odd-number prices i.e. a little less than a round number, e.g. $19.99 or £2.99.
Reasoning:
1.
There's evidence that consumers tend to perceive “odd-number prices” as being significantly lower than they actually are, tending to round to the next lowest monetary unit.
Thus, prices such as $1.99 are associated with spending $1 rather than $2.
2.
Fractional prices suggest to consumers that goods are marked at the lowest possible price.
When prices end in an odd way, say $39, customers tend to believe that the product is priced at a discount (maybe at $1 or $11).
On the other hand, rounded numbers convey an impression that the retailer is padding the price with a big fat margin.
Research:
According to a 1997 study published in the Marketing Bulletin,
approximately 60% of prices in advertising material ended in the digit 9,
30% ended in the digit 5,
7% ended in the digit 0
and the remaining seven digits combined accounted for only slightly over 3% of prices evaluated.
Source:
https://en.wikipedia.org/wiki/Psychological_pricing
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