How do you set odd-even prices?
When businesses use odd-even pricing, they change the last digit of a product or service price to either an odd or even number based on how they want customers to understand the whole number. Item prices that end in odd numbers look less expensive than they are. On the other hand, items with even numbers (especially “0”) look more expensive.
Odd-even pricing comprises two main strategies: odd-number pricing and even-number pricing.
The price of a good or service ends in an odd number, like $19.99 or $4,999. This is called odd-number pricing.
When you use even-number pricing, the last price is an even number, like $20.00 or $5,000.
Some companies want their customers to think they’re getting a good deal or want them to buy something on the spot. Some people want their things to feel expensive or unique. How people feel about your products (and your business as a whole) depends significantly on how much they cost. So, the difference in price of 1 to 5 cents, or $1 to $5, could also mean millions of dollars in sales.
Like words
- Prices for odd numbers
- Price based on even numbers
- The Mind Behind Odd-Even Pricing
How it Works
Pricing based on odd or even numbers is based on the grounding effect and how our brains work with numbers. People give more weight to the first number in a price because they read from left to right.
It doesn’t look like taking $1.01 off the price of your item or adding $1.01 to it is proportional since taking $1.01 off means the number before the decimal goes down by 1, but adding $1.01 doesn’t make it go up at all. It looks like there is a more significant difference between $2.99 and $4.00 than between $3.00 and $4.01, even though they are the same.
When people read a number like $24.99, the “24” stands for something. People unconsciously think that $20.99 is less expensive than $30, even if they know that $30 is the same amount.
The dollar number ($29) is the anchor in this case. That odd-number cent value (.99) lets the seller lower the price and use that lower dollar amount without losing money.
It works the same way without the number. The number on the left will be the most important to the customer. The brain would think that $299 is $100 less expensive than $300 because it is in the “$200” range, even though the difference is only $1.
Simple math tells them that it’s not cheaper. They are aware that they are still spending a lot of money. But for that split second, their subconscious thinks about it; this small change sets off the “good deal” reaction.
How People See Value
Odd-even pricing is related to the idea of perceived worth and anchoring. People unconsciously think that things that end in “0” are worth more because the price seems higher. They might expect to pay more or less for it, depending on the goods and the people who buy them.
For example, here is a quick list of steps showing how John, a customer, might buy something from the Louis Vuitton store.
- John makes up his mind to buy some nice shoes. He shops at Louis Vuitton because it is a well-known high-end name.
- He goes into the shop. Right away, he is met by employees dressed in suits who look clean and classy.
- He chooses a pair he likes and reads the price tag: $1,000.
- This is precisely what he wants from a top designer name. He’s sure about his purchase because the price backs up what he already thought about the quality of the brand’s products.
When it comes to unique and expensive items, the price tag affects how a customer thinks about the brand as a whole. If the shoe’s price had ended in a “9,” it might not have seemed as high-class, which takes away from the fun of getting them. In this case, the high-end fashion brand may gain from making its items look more expensive.
It’s important to note that the opposite approach works better for most businesses, even those in the luxury industry. There is a strong connection between buyers and the number 9. This means that making the product seem cheaper is more likely to get them to act (i.e., buy). The prices of about 90% of items are odd.
Background History
Prices finishing in “9” didn’t become common until the 1920s, even though odd-even pricing has existed since the late 1800s. It wasn’t just the allure of a deal; prices ending in “.95” and “.99” were popular no matter what.
One cent less than a round number, like $1.99 instead of $2.00, is called “just below pricing.” This may also have started as a way to stop theft. When prices were given in whole dollars, dishonest cashiers could take the money without writing it down.
By setting prices just below a round number, store clerks had to open the cash register to give change. This made the transaction official and stopped the theft. This method requires smaller coins and ensures the deal is recorded, which protects the store’s profits.
This way of setting prices has changed because of inflation and the resulting drop in the value of money. As smaller coins, like the penny in some countries, are phased out, your purchases are rounded up to the closest five cents or coin of a similar value. Just below prices have been changed by this rounding. For example, things might end in.98 or 99, which round up, or 96 and.97, which round down.
Even though Australia hasn’t had one- or two-cent coins since 1992, this is still how most things under a few hundred dollars are priced. Similarly, this way of setting prices is still used in some European countries that have eliminated their most minor euro coins.
Standing out in retail
Retail stores were the first to use the odd-even price strategy, but you can see it almost everywhere now. It’s an essential part of shopping and is considered one of the best ways to set prices. This is because it gets into people’s minds and changes their actions without realizing it.
Many stores have found that they can charge more for an item by adding “.99” to the end of the price. People aren’t as interested in a $28.00 hat as they are in a $29.99 one, even though they pay more.
One reason is that most people, even those who care about prices, don’t know how much something should cost. The only things they can compare it to are other items in the same price range that are like it. As a business, you can set prices however you want if you consider how people feel about them.
How Well Does Odd-Even Pricing Work?
In the early 1900s, JCPenney examined how odd-number vs. even-number prices affected people’s minds. They found that people thought they were getting a better deal when the price ended at 7, 8, or 9. The odd numbers made it feel like making a purchase choice right away. Studies have shown that “9” works best for an odd pricing approach. One study by MIT and University of Chicago experts found that when three of the same items were priced at $34, $39, and $44, the $39 item sold the most.
Luxury items, on the other hand, do better with prices that end in an even number, especially ones that end in “0” or “00.” This is because luxury goods differ from everyday goods; people are willing to pay more for them because they are seen as more valuable or important. Value is the most important thing.
Still, odd-even prices work best when the words and images around them support the value message you want to send. Your pricing, copy, and brand aspects should all work together.
Things that are good and bad about odd-even pricing
Positively affects what consumers want and how they see value
– Helps customers decide to buy; – Lowers the chance of buyer’s remorse; – Gives the impression of a deal or price, which leads to more sales
Price optimization is possible because businesses can try different prices and pick the best one.
It helps your business stand out and builds trust with your target audience.
Pros and cons
Some people see it as dishonest or greedy.
It hurts customer trust when used too often or in the wrong conditions.
It might not work for all products or all market groups.
Your profit margins may decrease over time if you rely too much on odd-even prices.
It needs a deep knowledge of how people act and the willingness to try different prices.
How People Feel About Odd-Even Prices
Pricing items with odd numbers is a well-known marketing trick that has been studied extensively over the past 100 years. It’s talked about a lot on the web, in books, social media, and business classes.
Customers know what the “99” means at the end of your price.
But that doesn’t mean it’s not dangerous.
Implications for Ethics
At first glance, using strange prices to get people to buy might not seem bad. It’s easy for them to understand how valuable your product is since you’re in the business of making money.
But where do you stop?
There is a wrong way to use odd-even pricing called “price anchoring.” You could make it look like there is a big deal if you set an unrealistically high “original” price or raise your old price before putting it up for sale.
For instance, a store might show a $40 item that “originally” cost $50 but is now on sale for $39.99. The odd-ending price makes it look like a good deal, but if the thing was always worth $40 and was never meant to sell at $50, the discount isn’t what it seems.
How people feel and trust
People will question your brand’s credibility if your odd-even price scheme is dishonest or if customers don’t think they got the value it suggests.
When you price a product at what people think is the “right” price for what it’s worth, on the other hand, odd pricing can make people trust you more.
Being honest and open with your customers is essential for maintaining your brand’s reputation. Ensure that your pricing plan fits these values so that customers don’t have a bad experience.
Getting a Balance
In the end, the odd-even price method works best when it’s used sparingly and honestly. It would be best to never use it as your only strategy to change people’s behavior. Instead, it should be one of many you use.
You can use it as an effective marketing tool without breaking any social rules if you know how it affects how customers feel about it and how much they value it.
Thoughts on the Odd-Even Pricing Strategy
Crowd to Aim for
How well odd-even pricing works for your goods will depend on your target audience’s demographic (or firmographic), psychographic, and cultural traits. For instance, the “99” price will work well for customers who care about value, but wealthy customers may think it makes the product look cheap.
Type of Product
As we already said, even-numbered prices can be reasonable for expensive items. But daily things like groceries and household items sell much more when the number at the end is odd. Knowing how customers see your product’s value and how that fits their expectations is essential.
Brand Picture
Your pricing approach should match how you position and identify your brand. If your brand is high-end, odd-even pricing might not fit with the picture you’ve created. If your brand is known for selling good items at low prices, on the other hand, “99” pricing may help boost that image.
How Demand Changes with Price
If people expect to spend $80, you’ll never sell a $130 item for $129.99. The first thing you should do is figure out a reasonable price for your product based on how much people are willing to pay for it. Price flexibility means that odd-even pricing doesn’t always lead to more sales.
Prices of Competitors
All of your rivals’ prices likely are about the same. This is an excellent way to measure price flexibility in general. After that, you can choose whether you want your brand to be seen as a high-end or low-cost choice in the market. You can also change your prices based on how they plan to sell and who they want to buy from.
Sales Income
Of course, how well your goods sell will significantly impact how much you charge for them. You’ll have to keep an eye on your profits while balancing the costs of production and fees with what customers want and the pressure from other businesses. Odd-even pricing can help increase sales if done right, but it shouldn’t be more important than making a good profit margin.
