Price-Ending Strategies and Managerial Perspectives: A Reciprocal Phenomenon - Part I

Summary

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Psychological pricing has been used by marketers for a long time to influence buying behaviour. It is the practice of structuring and presenting prices to appeal to consumers' emotions and to influence their decision-making processes. The odd-even psychological pricing strategy, a common practice in the marketplace, uses certain odd and even digits as price endings, which have the potential to influence consumers' perceptions of the price or the product. The current paper presents Part I of the Price-Endings and Consumer Behavior Model (PCBM) in order to provide a theoretical explanation for restaurateurs' use of the odd-even psychological pricing strategy. Based on a mail survey of fine-dining restaurants and quick-service restaurants the results support the concept that restaurant operators intentionally use the odd-even psychological pricing strategy to signal quality and value

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Price-Ending Strategies and Managerial Perspectives: A Reciprocal Phenomenon - Part I

INTRODUCTION

Psychological pricing is the practice of structuring and presenting prices to appeal to consumers' emotions and to influence their decision-making processes (Pride & Ferrell, 1997). The odd-even psychological pricing strategy, a common practice in the marketplace, uses certain odd and even digits as price endings (i.e., $0.99 in $4.99 and $0.00 in $3.00), which have the potential to influence consumers' perceptions of the price or the product (Nagle & Holden, 1995).

Marketing researchers, as far back as the 1930s, have examined the extent to which the odd-even psychological pricing strategy has been used in the marketplace (Stiving, 2000; Stiving & Winer, 1997; Schindler & Kirby, 1997; Kreul, 1982; Friedman, 1967; Twedt, 1965; Rudolph, 1954). These studies have identified 95, 99 and 00 to be the predominant price endings used in the marketplace, apparently depending on price level, market segment, and product category. Specifically, 00 is used by high-priced, high-quality, or upscale firms; whereas 95 is used by mid-priced or average quality firms; and 99 tends to be used extensively by low-priced, low-end firms or firms promoting a high-value image (Naipaul & Parsa, 2001; Stiving, 2000; Stiving & Winer, 1997; Kreul, 1982; Friedman, 1967; Twedt, 1996; Rudolph, 1954). The widespread use of such pricing suggests that odd-even psychological pricing is an important marketing strategy.

Other researchers have tested the impact of odd-even psychological pricing on consumer...

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