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The Odd-Even Pricing Phenomenon: Does It Really Increase Sales

by
in
Krzysztof (Kris) Szyszkiewicz
Head of Delivery, Partner
November 20, 2023
pricing
strategy

Have you noticed that some prices have even or odd ends? Don't you think such rates are more attractive and give the feeling that the price is lower than it should be? 

Well, this is the psychology behind odd-even pricing phenomenon.

Even though the difference between full and odd-even prices is seemingly small, it actually has great value. Today we'll talk more about this strategy so you can understand why it's so attractive and how to use it.

What is Odd-Even Pricing?

Odd-even pricing is a psychological pricing method that involves setting prices so that they end in odd or even numbers, such as $9.98 or $9.99. It aims to impact how consumers perceive the price of a product. This approach is prevalent in various industries, from retail and ecommerce to premium products, with the intent to increase sales and shape customer perception.

The Impact on Consumer Perception

The strategy plays on consumer behavior. It creates a perception of value, urgency, a discount, etc. This all influences purchasing decisions.

But why?

It's really simple to explain. Just see:

Sense of Greater Value

The last digits of a price play a major role in how consumers calculate the overall cost of an item. Here, even and odd pricing creates a psychological effect where consumers think about odd prices as the representation of a better deal.  

For example, it can lead consumers to mentally round down odd prices and round up even prices, and affect their perception of the total expense.

Sense of Extra Saving

This method shares similarities with charm pricing, where prices end in "9" (e.g., $9.99). Both strategies encourage customers to perceive the price as lower and more affordable than a rounded number. For example, a product priced at $19.99 may be perceived as closer to $19 than $20.

What does this mean? That people can add multiple items to their cart, believing they are pocketing extra savings.

Sense of Urgency

The odd-even model can trigger specific actions, such as prompting clients to buy without meticulous evaluation. That's because such selling prices, particularly with odd numbers, can create a sense of urgency. Also, consumers may perceive odd prices as temporary discounts. 

As a result, they influence potential buyers to make quicker purchase decisions.

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What are the Advantages and Disadvantages of Using an Odd-Even Price?

Incorporating this model can be tricky. However, if you can correctly identify prices that end in odd or even numbers, you can gain many benefits. 

Here they are.

💪🏼 Enhanced Brand Perception

Implementing odd and even pricing strategies can contribute to an enhanced brand perception. They position your brand as one that offers better sales and discounts than anyone else. Like we have said before, customers see more value in prices and feel like they are saving money. As a result, they see your brand as much more attractive than competitors.

💪🏼 Boosted Sales

As people feel urgency, they are able to make quicker purchases, buy more, recommend the offer to friends, etc. This results in increased sales volumes and frequencies. Such odd-even pricing strategies are particularly effective in retail and ecommerce, where creating a buzz can entice larger audiences to buy.

💪🏼 Client Satisfaction

Using even and odd pricing can help consumers buy products they wouldn't have purchased before because they thought they were too expensive. But if the price gets more attractive - because it dropped a few pennies - their willingness to buy may increase. This boosts their satisfaction and ties them to the brand as they wait for further bargains.

However, we also have some disadvantages of odd even prices. 

Among them are:

❓ Understand Important Areas

Before you use odd or even pricing, you better understand consumer segments, industry dynamics, and the psychological nuances that influence purchasing decisions. Misjudging these aspects can result in a mismatch with consumer expectations and affect the effectiveness of the even and odd pricing strategy.

❓ This Method Doesn't Work with Every Client

This psychological pricing strategy works with many target audiences, but not all.  Not every customer will be caught by an apparent price cut of a few pennies or one cent. Many potential buyers are very aware of the psychology behind price setting. For them, whether your price is the whole number, like 10.00 or incomplete, as 9.99, it won't make much difference. They can also turn against you with the thought that you have imposed odd prices to capitalize on their money. 

Check out These Odd and Even Pricing Examples

So much for theory, now check out how the giants are using strategies that involve this method.

Apple

Apple, a global tech giant, employs odd-even strategies across its product lineup. For instance, the monthly installment for an iPhone is not the full price, and the ending is odd or even. (e.g., $41.62). This psychological effect suggests a lower cost to consumers and subtly shows they can afford Apple's products. Given the premium quality of Apple's offerings, such a price may seem even more low.

source

2. Walmart

Walmart also widely incorporates odd-even models. Many of its products are priced with odd numbers, such as $19.97 or $29.99. Thanks to odd endings, they really create the impression of affordability. Such prices led people to perceive Walmart's offerings as budget-friendly and aligned with the brand’s positioning as a cost-effective retail destination.

3. Amazon

Amazon couldn't be missing from our list. The e-commerce giant strategically uses odd and even prices to influence its buyers. On this platform, you will find plenty of great deals with just such prices. As you can see, even during promotion, the price has an end of 99. Such activities are part of Amazon's customer-centric approach and contribute to the overall positive shopping experience on Amazon.

source

4. Starbucks

Now Starbucks - a global coffeehouse company. It uses odd prices on its menu, often ending at positions such as $3.75. This example of an odd approach builds the perception of affordability and plays into the psychology of small, incremental price differences. Typically, people see odd prices as slightly lower and are more eager to make additional purchases or upgrades.

5. Zalando

And here's Zalando, a leading online retailer of shoes, fashion, and beauty. It also has examples of odd or even prices in its product selection. Just see - the selling price of Nike's shoes usually ends in odd cents, such as $119.95. This strategy shows that despite Zalando offering high-quality products with a touch of exclusivity, it sells them at more attractive prices. Thus, we feel a subtle sense of affordability, while prices are not as small as we really think.

source

Tips on Working with Odd-Even Strategies

Now learn about some good tips that can enhance your price effectiveness, strengthen customer relationships, and contribute to the overall success of your business.

  • Maintain transparency to build and preserve client trust - strike a balance between leveraging psychological charging and maintaining ethical practices.
  • Tailor your plans based on the demographics and preferences of your audience - various consumer segments may respond differently to your tactics, so adjust your approach to your customer base.
  • Implement A/B testing to measure the impact of odd-even methods on consumer behavior - experiment with different price points, analyze the results, and refine your plans based on the data. 
  • Ensure that your odd-even tactic aligns with the perceived value of your products or services. Luxury items may benefit from odd prices to convey exclusivity, while everyday products might use even prices for simplicity - the key is to harmonize prices with the overall image you want to project.
  • Highlight limited-time offers or discounts with odd prices to encourage swift decision-making - this move will encourage shoppers to act quickly to get better deals.
  • You can also proactively communicate with clients about your odd-even strategy - education will make people understand your decisions and build trust. This will bring you even closer to your customers and avoid a situation where they may think you are cheating them with your prices and marketing strategy.

Find it Hard to Establish Prices in Your Business? That's Where Valueships Come In!

Establishing the right prices for your products or services can be so confusing, but with Valueships, you're in expert hands. 

Our specialized team excels in strategy consulting, pricing consulting, value-selling, and advanced analytics and research. What does this mean? 

That we guarantee your business model will be optimized and work in your industry. 

Want to know how we can do this? If so, contact us or read our case studies - they all showcase our expertise in improving business metrics, discovering new monetization options, and implementing value-selling techniques. So, whether you need assistance in setting the right prices, adopting value-selling strategies, or refining your overall pricing approach, Valueships offers tailored solutions. 

Our expertise spans various industries, including SaaS, Custom Software Development, E-commerce & Marketplace, and Professional services. 

Take Advantage of Odd Even Pricing Strategies

Prices are not just the value of your product in a given currency. It's a factor that incredibly affects how often and in what quantity people will buy your goods. To invite them to purchase, you can use a strategy that involves establishing prices at even and odd levels. By doing so, you can boost your profits, increase customer satisfaction, and improve the perception of your brand.

And if you think you've outgrown this task, contact Valueships.

We will leverage our capabilities and expertise and help your company implement optimal price strategies that will drive sustainable growth.

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Krzysztof (Kris) Szyszkiewicz
Head of Delivery, Partner

Certified expert in price, revenue and margin management in B2B companies and e-commerce. Member of the prestigious Professional Pricing Society. At Valueships, he is responsible for the implementation of consulting projects and taking care of the profitability of clients. Prior to joining Valueships, he worked at McKinsey & Company in the area of ​​pricing and strategy.

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Krzysztof (Kris) Szyszkiewicz
Head of Delivery, Partner

Certified expert in price, revenue and margin management in B2B companies and e-commerce. Member of the prestigious Professional Pricing Society. At Valueships, he is responsible for the implementation of consulting projects and taking care of the profitability of clients. Prior to joining Valueships, he worked at McKinsey & Company in the area of ​​pricing and strategy.