Odd even pricing

From CEOpedia | Management online

Odd pricing, also known as psychological pricing, is a pricing strategy in which prices are set at a slightly odd number rather than at a round number. For example, a product may be priced at $9.99 instead of $10. This is done because research has shown that consumers tend to perceive odd prices as being less expensive than even prices. Odd pricing is often used in retail settings to make products appear more affordable and to encourage impulse buying.

Odd pricing

The psychology behind odd pricing is based on the idea that consumers tend to perceive prices that end in a "9" as being significantly less expensive than prices that end in a whole number. This is known as the "left-digit effect," and it is thought to occur because our brains process the first digit in a number more quickly and prominently than the other digits.

So when we see a price that ends in "9," our brain perceives the number as being closer to the next lower whole number, making it appear to be a better deal. For example, $9.99 is perceived as being closer to $9 than to $10, making it seem like a better value. Additionally, odd pricing can also create a sense of urgency by giving the impression that the product is on sale or that the price will soon change.

It is important to note that the odd pricing effect may vary depending on the culture, the product and the context. Odd pricing can be less effective for luxury or high-end products, and it may not be effective in cultures where round numbers are more highly valued.

Even pricing

Even pricing, also known as full pricing, is a pricing strategy in which prices are set at a round number, rather than at a slightly odd number. For example, a product may be priced at $10 instead of $9.99. Even pricing is often used in businesses that want to project a sense of quality and professionalism.

Even pricing is less common than odd pricing and is often used for products that are perceived as high-end or luxury items, or for products that are not intended to be sold through impulse buying. It can also be used to project a sense of trust and integrity to customers.

Even pricing can also be used in situations where customers are willing to pay more for a product or service, such as in professional services, or high-end technology products. The idea behind this is that by setting a higher, even price, the business can convey to customers that their product or service is of high quality and worth the extra cost.

It's important to note that the effectiveness of even pricing may vary depending on the product, the target market and the context. Even pricing may be less effective for products that are intended to be sold through impulse buying, or for products that are intended to be perceived as affordable.

Does it have to be "9" in the end?

The use of prices ending in "9" is a common practice in odd pricing, also known as psychological pricing, but it is not the only way to use odd pricing. The idea behind odd pricing is to set prices at a slightly lower number than a round number, in order to create the perception that the product is less expensive than it actually is. Therefore, other digits or numbers can also be used to create this perception, such as prices ending in "7" or "5".

For example, a product may be priced at $9.97 instead of $9.99 or $9.95 instead of $10, the goal of these prices is to create the perception that the product is cheaper than it actually is.

It's important to note that the effectiveness of odd pricing may vary depending on the culture, the product and the context. The digit used for odd pricing should be carefully chosen depending on the target market and the cultural context. Additionally, Odd pricing may not be effective in cultures where round numbers are more highly valued.

Odd and even pricing examples

Odd pricing examples:

  • A retail store selling a shirt for $19.99 instead of $20
  • A fast-food restaurant selling a combo meal for $6.99 instead of $7
  • A gas station selling a gallon of gas for $2.99 instead of $3
  • A electronics store selling a laptop for $999.99 instead of $1000

Even pricing examples:

  • A luxury fashion brand selling a handbag for $1000
  • A high-end jewelry store selling a diamond ring for $5000
  • A professional service firm charging $100/hour for consulting services
  • A premium car dealership selling a car for $50,000

It's worth noting that some businesses may use a combination of both odd and even pricing strategies, depending on the product or service they are selling and their target market.

For example, a retail store may use odd pricing for everyday items that are intended to be sold through impulse buying, but use even pricing for high-end or luxury items that are intended to be perceived as more expensive. Additionally, there are some other pricing methods like skimming pricing, penetration pricing and value-based pricing that can be used in combination with odd and even pricing.

Psychological theories behind odd pricing

There are several psychological theories that are thought to be behind the effectiveness of odd pricing. Some of the most commonly cited theories include:

  • The "left-digit effect": This theory suggests that our brains process the first digit in a number more quickly and prominently than the other digits. Therefore, when we see a price that ends in "9", our brain perceives the number as being closer to the next lower whole number, making it appear to be a better deal.
  • Anchoring effect: This theory suggests that people tend to rely on the first piece of information they receive (such as a price) as a reference point for evaluating subsequent information. So, when a price is anchored by an odd number, the customer is more likely to make a purchase.
  • Social Comparison: This theory suggests that people tend to compare things with each other, so when a price of a product is compared with a higher price, the customer is more likely to buy it.
  • Loss Aversion: This theory suggests that people are more motivated to avoid losses than to achieve gains. Therefore, when a customer perceives a lower price, they may be more likely to make a purchase in order to avoid missing out on a perceived deal.
  • The Weber-Fechner law: This theory suggests that people's perception of changes in intensity of a stimuli varies logarithmically. Therefore, a small change in price may be perceived as a larger change in value.

It's important to note that the effectiveness of odd pricing can vary depending on the culture, the product and the context. The choice of the odd number should be carefully chosen depending on the target market and the cultural context. Additionally, odd pricing may not be effective in cultures where round numbers are more highly valued.


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