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How Odd-Even Pricing Influences Consumer Buying Decisions

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    Odd-even pricing draws on psychological studies into how humans think and behave to successfully promote and sell items and services.

    According to a McKinsey economic sensitivity analysis, price is by far the most effective method for increasing earnings. A 1% increase in price increased earnings by 6% on average.

    Whether you realize it or not, if you work in e-commerce, you constantly draw on decades of psychological study. Everything from delivering marketing emails to modifying the color of a checkout button, writing a compelling blog post, and developing appealing new product photos is heavily founded in psychology. Choosing the best prices for the products you sell is no exception, as the last number has the potential to impact people’s perceptions of your product and entice them to buy.

    Let’s understand the ins and outs of odd-even pricing and how it Influences consumer buying decisions.

    Understanding Odd-Even Pricing 

    Odd-even pricing is a psychological pricing approach that uses the variances in customer perceptions of prices ending in odd numbers vs prices ending in even numbers. There is rarely any monetary difference between $9.99 and even $10. However, customers’ perceptions of a $10 product price differ from those of a $9.99 price. Even if the difference is one cent, research suggests just a single cent can influence sales volume.

    Companies use the psychological effect associated with changing ending numbers to influence customer behavior. Odd-numbered pricing indicates a bargain or a good deal, whereas even-numbered prices—particularly those ending in a round number like zero—are associated with premium products.

    Industries commonly using odd-even pricing:

    1. Retail: Supermarkets, clothing stores, and electronics retailers
    2. Hospitality: Hotels, resorts, and travel agencies
    3. Food and Beverage: Restaurants, cafes, and fast-food chains
    4. E-commerce: Online retailers across various product categories
    5. Entertainment: Movie theaters, amusement parks, and event organizers
    6. Gasoline and Fuel: Gas stations and fuel distributors
    7. Health and Beauty: Cosmetic brands, pharmacies, and wellness stores

    Examples of Odd-Even Pricing

    Consider these examples to observe odd-even pricing in everyday life.

    1. Fast food restaurants commonly employ odd-number pricing, with prices frequently ending in ninety-nine cents. However, dollar menus present an exception.
    2. Service industries typically adopt even-number pricing, with providers such as doctors, dentists, lawyers, cleaners, tutors, and entertainers often quoting prices in whole numbers ending in zero.
    3. Luxury shops employ whole-number pricing, which frequently ends in even figures. Most high-end jewelry stores and art galleries will have pricing that ends in whole numerals.
    4. Retail sales feature prices ending in odd numbers, particularly in decimals, with digits such as nine or five used to end sale prices. 

    The Psychology of Odd-Even Pricing

    The last digits of a product’s pricing can influence a consumer’s thinking as much and sometimes more than the initial digits. Charm pricing is the tendency to make some price points look lower than they are.

    • Prices that end in an odd number of cents—for example, $7.99 or $124.95—can appear to be lower than they are. When goods are on sale in retail stores, the businesses use an odd pricing approach to make a low price appear even cheaper. Non-sale products for budget-conscious shoppers sometimes finish in an odd number of pennies.
    • When a price ends with a whole number, it commonly conveys a sense of completion. It is especially true when the entire number has an even numerical value. Luxury shops use even-ending pricing. Service providers, such as attorneys and tutors, prefer even numbers; thus, their prices terminate at zero.

    Impact on Consumer Buying Decisions

    Odd-even pricing has been shown to influence consumer buying decisions in several ways:

    1. Increased Perceived Value: Odd-even pricing also influences consumer buying decisions by creating a perception of savings. Consumers are more likely to believe they are getting a good deal when they see prices ending in .99 or .95, even if the savings are small.
    2. Enhanced Price Sensitivity: It can make consumers more price-sensitive as they compare prices and bargains. It leads to increased competition among retailers and greater emphasis on price-matching and discounts.
    3. Psychological Pricing Anchors: As a psychological anchor, odd-even pricing affects how customers view the fairness of a price. For instance, even if there isn’t much of a price difference, buyers consider a product priced at $199 to be less expensive than one priced at $200.
    4. Impulse Purchases: The perception of getting a bargain or discount can prompt impulse purchases, as consumers feel compelled to take advantage of what they perceive as a limited-time offer. 
    5. Brand Perception: When brands use odd-even pricing (like $9.99 instead of $10), consumers perceive them as more budget-friendly or value-oriented. The perception attracts price-conscious shoppers who believe they’re getting a better deal, even if the price difference is very small.
    6. Decision-Making Heuristics: It influences consumers’ decision-making heuristics by exploiting biases such as the left-digit effect and anchoring. Biases sway consumers’ perceptions of prices and their willingness to make purchases.

    When to Use the Odd-Even Pricing Approach?

    Odd-even pricing is more than just setting prices at.99. The psychology behind numerical perception delves deeper, influencing how consumers perceive brand quality.

    Prices ending in 9 show good value, while those ending in 0 suggest higher prestige. Leveraging numerical psychology allows subtle product positioning, yet misjudging this strategy can harm brand perception.

    Odd prices attract value-conscious buyers seeking bargains, driving impulse purchases and larger buys. The perceived good deal reduces purchase deliberation and concern about overbuying.

    However, for brands targeting quality-conscious buyers for long-term retention, odd prices may not match. Premium brands or those offering high-end products use even-numbered prices to reinforce a luxurious image.

    Examples, such as Chanel, Gucci, Prada, Fendi, Dolce & Gabbana, and Dior, renowned for luxury, rarely use .99 pricing, which shows how marketers intentionally employ odd-even pricing to influence consumer perceptions of their products.

    How to Develop an Odd-Even Pricing Plan?

    Here are a few tips to get you started to develop an odd-even pricing plan:

    Set Even Pricing and Offer Odd Percentages Off 

    Presenting the goods at an even price and then offering an odd-priced reduction is a terrific way to make your offer seem like a discount. One way to achieve this would be to reduce the price of a €18 shirt to €15.99. For market optimization, you can combine this with a high-runner approach to target the most well-liked products. 

    Set Irresistible Pricing

    Prices that end in 9s and 5s are so commonplace that they no longer have the same “sticking” effect with consumers. 

    Try marketing your pricing at an unusual or less-often-used price if you want it to stand out. Price your product at €25.99 rather than €28.99. Customers will be able to pick up on this number right away, and you will get their attention. 

    Evaluate and Track Outcomes

    Employ a staged approach by putting the plan to the test in particular marketplaces or with a subset of items. Keep an eye on how the plan is affecting sales and consumer behavior, then use the feedback to gauge how effective it is.

    Remember that pricing is an ongoing process. It is imperative that you consistently evaluate and improve your pricing strategy in consideration of consumer feedback, market conditions, and shifts in the competitive environment. 

    High-End Labels and Odd-Even Prices 

    If you own a luxury store, you might want to think about switching from odd to even pricing, particularly for new products that attract a lot of interest and improve consumer opinion of your brand. 

    Due to their popularity, customers sometimes mistake unusual pricing for sales. As a result, many luxury brands prefer more “whole” even pricing rather than odd ones. 

    Although the odd-even pricing concept is easy, its effect on customer purchasing choices is considerable. By examining several instances of odd-even pricing, we can see its extensive use and significant impact on consumer behavior. It is an influential approach businesses can adaptively employ to tactically price their offerings, improve their perceived worth, and ultimately boost their revenues. It truly embodies the significance of the adage – there is immense power in minor adjustments. Drive profitability and outperform competitors with Rubick.ai’s pricing optimization tools. Get started now!

    Prashasti

    Prashasti

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