How Odd-Even Pricing Psychology How Odd-Even Pricing Operates

How Odd-Even Pricing Psychology How Odd-Even Pricing Operates
Which of the following products do you believe people would be more likely to purchase? People would probably pick the hat priced at $29.99 over the same hat priced at $28.00 if they could see the hats apart from one another.

Why? Because consumers don't evaluate prices—particularly those that finish in—logically. Round numbers are less compelling than 99. You might be surprised to learn how much psychology plays a role in persuasive pricing.

According to behavioral science, we don't actually understand what drives us to make particular decisions, including determining if a price is "good." Unbeknownst to us, the presentation of options—which heavily emphasizes price—has a significant impact on how we make decisions. The author of The Psychology of Price, Leigh Caldwell, stated the following:

It appears that one of the key factors affecting successful pricing is psychology. The appropriate psychological strategy can boost sales by more than 200%, and professional SEO services understand the value of it.

You might believe that reasonable pricing should be based on figures like the cost of producing the product. However, unlike what most people believe, pricing is irrational and more psychologically based than they realize. Odd-even pricing is a psychological concept that can guide our pricing decisions.

Odd-Even Pricing: What Is It?

Odd-even pricing is a psychological pricing approach that makes use of the distinctions between how buyers perceive costs with odd and even final digits. The price difference between $9.99 and even $10 is almost nonexistent. However, customers' perceptions of a $10 product price and a $9.99 product price are genuinely different. Even though the difference is only one cent, according to the study, the number of sales can be affected.

Businesses use the psychological impact of different ending digits to their advantage in an effort to sway consumer behavior. Even-numbered pricing—particularly those that end in a round number like zero—often denotes premium goods, whereas odd-numbered prices frequently imply a sale or a great value.

The Origins of Odd-Even Pricing

The history of odd-numbered retail pricing is not well known. According to one explanation, business owners implemented such rates to combat employee theft. When goods were priced in whole dollars, such as $5 or $20, a buyer could find it simple to pay the precise amount without needing change. In that case, the cashier could simply steal the customer's money without ever opening the register. But the worker had to open the cash register to give change when the price was only a little bit less than a full dollar amount. Opening the register would cause a sale to be automatically recorded, eliminating the possibility of the employee stealing money covertly.

The idea of deliberately terminating pricing in odd or even digits gained attention as economists and business experts started studying consumer behavior. It was discovered via the use of experimental pricing strategies and in-the-wild observations that customers subconsciously allocated a different product value to items with almost identical prices but different last digits.

Odd-Even Pricing: A Psychological Approach

You must first comprehend the psychological principles underlying odd-even pricing in order to comprehend how the strategy applies to retail situations. It turns out that a product's final price might influence a consumer's decision just as much as—and sometimes even more—than its first numbers. Charm pricing, which deceives consumers into believing that prices are cheaper than they actually are, takes advantage of this phenomenon and is often employed by professional SEO services to drive revenue for businesses.

1. Prices that conclude in an odd number of cents, such as $7.99 or $124.95, can give the impression that a savings has been made. Retail businesses frequently employ an odd pricing approach when things are on sale in order to make a low price feel even lower. For buyers on a tight budget, non-sale items frequently end up with an odd number of pennies.

2. Items with even prices imply grace and completion. Prices that conclude in whole numbers frequently convey a sense of completion. This is especially true when that whole number has an even numeric value. Evening prices are frequently used by luxury retailers. Even numbers are preferred by service providers like lawyers and tutors, whose charges typically terminate in zeros.

Is odd-even pricing effective?

It has been demonstrated that odd-even pricing drives up demand for a variety of goods. Six goods were examined in one experiment to explore if unexpected price changes could boost demand. Every product experienced some growth in demand, but intriguingly, the impact was strongest for less expensive goods like cheese, chicken, and chocolates.

Many scholars have put forth theories as to why this psychological pricing technique is effective. For instance, some claim that the anchoring heuristic is the foundation for this preference for odd-even pricing. People base their assessment of the final cost on the first digit because they have been fixed to it.

The Top 5 Odd-Even Pricing Examples

Consider the following instances to observe odd-even pricing in action.
1. Odd-number pricing is used at gas stations. Not all gas stations just round their prices to 99 cents. Normally, they terminate them with cents of 99 and 9/10.
2. Prices at fast food establishments are odd-numbered. The majority of fast food menu prices are in cents. A dollar menu is one exception, but one dollar is also an odd number.
3. Even-number pricing is frequently used in the service sector. Doctors, dentists, lawyers, cleaners, teachers, and entertainers are just a few service providers who offer pricing quotes in whole numbers, usually with a zero at the end.
4. Whole-number pricing, which frequently ends in even numbers, is used by luxury stores. In a high-end jewelry store or art gallery, you may anticipate that the majority of the prices will be in whole numbers. There will be a healthy portion of those entire numbers that end in zero and another healthy portion that ends in five.
5. Retail sales frequently have decimal points at the end, and those points are frequently odd quantities. Retail sale prices typically, but not always, have a decimal point of nine or five.

The conclusion

Even though Odd-Even Pricing has been shown to have an impact on sales, it's still important to test this pricing strategy out before implementing it fully. Although it is accepted wisdom, that does not mean it is always true.

For instance, when Petco, an American retailer of pet products, began experimenting with pricing, they discovered that $0.25 was by far the greatest price for a quarter pound of a product sold by weight. Not the Odd-Even method of rounding up to a nine. That is illogical in light of everything the research demonstrates concerning odd-even pricing. According to John Rhoades, the company's former director of retail analytics,

"This violated the retailing guideline that there cannot be an "ugly" price."
Executives at Petco expressed skepticism after reviewing the results. They were aware of the incredible effectiveness of odd-even pricing but also were aware that it would not be a good fit for a bulk product sold by weight due to a variety of factors. Sales increased by over 24% in just six months as a result of their faith in the experiment's findings.

What is the purpose? Odd-even pricing is a tried-and-true strategy, but like with many business-related psychological applications utilized by professional SEO services, you need to see how it performs in the real world to know if it will be effective for you.

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