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ISSN : 1229-8778
‘Odd pricing’ is a frequently utilized method for influencing consumer decision making. It makes the consumers feel that the merchandise is on sale with reduced prices. Because Odd pricing is used so much, consumers usually have to choose between several different odd prices; therefore, this study focuses on comparison of odd prices. Perception differences between odd prices that end similarly (such as with -90 or -900) can be assumed to result from the difference of the first digits. In price information processing, consumers are known to focus more on first digits rather than latter digits. We speculated that as the first digits to be processed are in effect a reference point, these first digits would lead to differences in price perception. Because of the limited human information processing ability, consumers recode numerical information (including prices) into more manageable numbers of category. Since multiples of 10 or 5 have high cognitive accessibility in the decimal system, internal categories of numbers tend to be based on multiples of 5 or 10. Once categories are formed, the perceived distance between items of different categories is exaggerated. Our hypothesis is that when the first digits of price have higher cognitive accessibility, they are located along category boundaries, therefore having increased perceived distance from other categories. This would lead to greater price discount perception. To test our hypothesis, in Study 1 we examine price discount perception differences among odd prices with either high or low cognitive accessibility of the first digits. In Study 2, to attain more direct evidence of these effects of subjective categorization, we manipulate categorization, and examine how categorization and cognitive accessibility of the first digits of odd-price affects price discount perception. The results show that when cognitive accessibility of the first digits is high, people perceive greater price discount. Moreover since this effect is based on consumers’ subjective categorization, it can be moderated by other temporarily prevalent categorization schemes. These results propose an effective odd pricing method.
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