Odd-Even Pricing

Definition

Odd-even pricing is a pricing strategy where products are priced at odd or even numbers, typically ending in 9 or 5, rather than round numbers. This strategy is often used to create the perception of lower prices and encourage impulse purchases.

5 Must Know Facts For Your Next Test

1. Odd-even pricing is often used to create the perception of lower prices, even when the actual price difference is minimal.
2. Prices ending in 9 or 5 are more commonly used in odd-even pricing, as they are thought to be more effective in triggering impulse purchases.
3. Odd-even pricing can be particularly effective in industries where consumers are price-sensitive, such as retail and e-commerce.
4. The use of odd-even pricing can vary depending on the product category, with higher-priced items often using round numbers to convey a sense of quality.
5. Odd-even pricing is a common tactic in the five-step procedure for establishing pricing policy, as it can help achieve desired profit margins and meet customer expectations.

Review Questions

• Explain how odd-even pricing relates to the role of pricing in the marketing mix.
  • Odd-even pricing is a key pricing strategy that can significantly impact the overall marketing mix. By influencing consumer perceptions of value and encouraging impulse purchases, odd-even pricing can be a powerful tool in the marketer's arsenal. It helps to position the product in the mind of the consumer, often conveying a sense of affordability or value, which can then influence other elements of the marketing mix, such as promotion and distribution.
• Describe how odd-even pricing might be incorporated into the five-step procedure for establishing pricing policy.
  • Odd-even pricing would likely be considered during the third step of the five-step procedure for establishing pricing policy, which involves selecting the appropriate pricing method. Marketers would evaluate the potential impact of odd-even pricing on factors such as profit margins, customer perceptions, and competitive positioning. They would then determine if odd-even pricing aligns with the overall pricing objectives and strategy for the product or service, and incorporate it accordingly into the final pricing policy.
• Analyze the use of odd-even pricing as a pricing strategy and tactic for existing products.
  • Odd-even pricing can be a valuable pricing strategy and tactic for existing products, particularly in markets where consumers are price-sensitive. By leveraging the psychological impact of prices ending in 9 or 5, marketers can create the perception of lower prices and encourage impulse purchases, which can help maintain or increase profit margins. However, the effectiveness of odd-even pricing may vary depending on the product category, competition, and customer expectations. Marketers must carefully evaluate the potential benefits and drawbacks of odd-even pricing in the context of their existing products and overall pricing strategy.

Related terms

Psychological Pricing: Pricing strategies that take advantage of consumers' cognitive biases and decision-making tendencies, such as odd-even pricing, to influence their purchasing behavior.

Charm Pricing: A type of odd-even pricing where prices are set just below a round number, such as $9.99 instead of $10, to make the price appear lower and more appealing to consumers.

Price Endings: The final digits of a product's price, which can be used to convey information about the product's value or quality, as in the case of odd-even pricing.