Odd-even pricing is a pricing strategy involving the last digit of a product or service price. Prices ending in an odd number, such as $1.99 or $78.25, use an odd pricing strategy, whereas prices ending in an even number, such as $200.00 or 18.50, use an even strategy.
History
The original intention of using an odd pricing strategy, so the story goes, was to force the cashier to open the cash register to give change. By pricing an item at $4.75 or 49.95, the cashier would likely need to get access to the change in the register, which recorded the sale. Otherwise, theoretically, the cashier could more easily pocket, say, $5 or $50 without ever having to open the register.
Psychology
It has been suggested that pricing items just under a whole number, such as at $29.95 instead of $30.00, makes the price seem like a bargain – that customers will focus only on the first number and perceive the price to be closed to, in this case, $20 than to $30. In broader terms, odd pricing suggests a bargain versus even pricing, which encourages buying.
According to a 1997 study reported in Marketing Bulletin, more than 90% of advertised prices at that time ended in an odd numeral. The economy has changed and shoppers are certainly savvier today, but it is likely that a majority of prices still end in an odd number.
See also:6 Marketing Psychology Strategies to Boost Ecommerce Sales
Market positioning
If buyers do see odd numbered prices as bargains, that perception should play into a business’ pricing strategy. If the company desires to be seen as a good value, or a discount retailer, pricing items using an odd pricing strategy makes a lot of sense. And companies that want to be seen more as an upscale retailer, or with premium products or services, pricing using whole numbers – even numbers – makes more sense.
See also:Persuasion Psychology: What It Is and How It Works
Retailer pricing schedules
Some retailers use the last digit in their product prices to indicate how discounted it has been and whether it could be discounted further. Target, for example, has such a pricing schedule. Sources report it looks like this:
- Products are discounted in increments from 15% to 30% to 50%, then 70%, and finally, 90%
- Prices ending in 6 or 8 will be marked down again during the next repricing cycle, which happens about every two weeks
- Prices ending in 4, such as $12.94, are final clearance and will not be discounted any further
When choosing a pricing strategy, it appears that going with an odd price, which results in a dollar figure and cents, such as $3.95, has the biggest impact versus a whole number, such as $10.00. However, the difference between odd and even cents makes less of a difference, as when consumers are comparing $7.99 and $7.98.
Odd-Even Pricing FAQ
Why is odd-even pricing used?
Odd-even pricing is a pricing strategy used by retailers to encourage customers to purchase items in a specific quantity. For example, a retail store may offer certain items for $1.99 or two for $3. This pricing strategy is used to increase sales, create a sense of urgency for customers, and create a perceived value for the product.
How does Walmart use odd/even pricing?
Walmart uses odd/even pricing to create the perception of a lower price than what it actually is. For example, they might price an item at $19.97 instead of $20.00. It is a psychological pricing strategy that is designed to make customers perceive the item as having better value.
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