Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

99-cent pricing may not be worth the penny

07.09.2011
Just-below pricing, or 99-cent endings, is a common marketing tool used to attract customers looking to get bang for their buck. But a Rutgers–Camden professor says that, in some cases, a penny saved doesn't always translate into a penny earned for retailers.

"The difference between a good product and a poor product in the consumers' eyes could come down to that penny," says Robert Schindler, a professor of marketing at the Rutgers School of Business–Camden. "When consumers care more about product quality than price, just-below pricing has been found to actually hurt retail sales."

Schindler, one of the world's leading pricing scholars, is conducting a meta-analysis of the effect 99-cent price endings have on consumers. For years, he has studied the marketing strategy behind pricing an item at, say, $29.99 instead of $30. The penny may not seem like much, but people actually perceive a big difference in price and think they're getting a bargain.

The illusion, Schindler says, isn't the last number on the price tag. It's the first number.

"People focus more on the left-most digit," says Schindler, who reviewed about 100 different studies in performing his meta-analysis. "Just-below pricing certainly makes it seem like the price is less than it actually is. It gives an image of being a bargain or a discount."

Schindler says most people won't perceive a big difference in price between a $20 item and a $25 item. But by dropping the price of each item by one cent, "something that costs $19.99 is considered much less expensive when compared to something priced $24.99."

But while just-below pricing has been effective in increasing sales, Schindler has found that it can also work against retailers.

"On the other side, it can give the image that an item is of low or questionable quality," he says.

Schindler says most people are more concerned about quality over price when buying luxury products, services, or making risky purchases.

"Retailers don't want those items to come across as cheap," Schindler says. "For example, if you're going to do some work on a person's house, you wouldn't want your price to reflect that you might do a poor job. In that case, the customer is concerned about quality and I would suggest not using 99-cent endings. It's better to be straightforward when selling that kind of product."

Schindler has been recognized as one of the top pricing researchers in the world by an article published in the Journal of Business Research, which surveyed the articles, authors, and institutions that have contributed most to the topic of pricing over the past 30 years.

The publication recently ranked Schindler as the fourth-most productive pricing researcher in number of articles adjusted for multiple authorship and the 13th-most productive researcher in absolute number of articles.

Schindler's research has had a profound impact on how marketers, retailers, and scholars study consumer behavior. In 2007, Fordham University held a scholarly conference focusing on Schindler's definitive research. Schindler was awarded the Lifetime Achievement Award in Pricing Research at the conference, which was held in New York.

He recently completed the forthcoming textbook Pricing Strategies: A Marketing Approach (Sage Publications), a book written to make basic pricing concepts more accessible to business students.

"We want students to be able to have the fundamentals so that pricing can be part of their business education, whether they want to be an entrepreneur, part of a big company, part of a small company, or something else," Schindler says.

"Very often, there are far more courses in production, distribution, and promotion than there are in pricing," he says. "That pricing isn't taught that much represents a gap in business education and this book is designed to fill that gap."

Schindler, a Cherry Hill resident, received his bachelor's degree from the University of Pennsylvania and his master's degree and doctorate from the University of Massachusetts.

He teaches "Principles of Marketing," "Pricing Strategies," and "Consumer Analysis" at the Rutgers School of Business–Camden.

Ed Moorhouse | EurekAlert!
Further information:
http://www.rutgers.edu

Further reports about: 99-cent 99-cent price endings Just-below Pricing marketing tool strategies

More articles from Studies and Analyses:

nachricht Drone vs. truck deliveries: Which create less carbon pollution?
31.05.2017 | University of Washington

nachricht New study: How does Europe become a leading player for software and IT services?
03.04.2017 | Fraunhofer-Institut für System- und Innovationsforschung (ISI)

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Can we see monkeys from space? Emerging technologies to map biodiversity

An international team of scientists has proposed a new multi-disciplinary approach in which an array of new technologies will allow us to map biodiversity and the risks that wildlife is facing at the scale of whole landscapes. The findings are published in Nature Ecology and Evolution. This international research is led by the Kunming Institute of Zoology from China, University of East Anglia, University of Leicester and the Leibniz Institute for Zoo and Wildlife Research.

Using a combination of satellite and ground data, the team proposes that it is now possible to map biodiversity with an accuracy that has not been previously...

Im Focus: Climate satellite: Tracking methane with robust laser technology

Heatwaves in the Arctic, longer periods of vegetation in Europe, severe floods in West Africa – starting in 2021, scientists want to explore the emissions of the greenhouse gas methane with the German-French satellite MERLIN. This is made possible by a new robust laser system of the Fraunhofer Institute for Laser Technology ILT in Aachen, which achieves unprecedented measurement accuracy.

Methane is primarily the result of the decomposition of organic matter. The gas has a 25 times greater warming potential than carbon dioxide, but is not as...

Im Focus: How protons move through a fuel cell

Hydrogen is regarded as the energy source of the future: It is produced with solar power and can be used to generate heat and electricity in fuel cells. Empa researchers have now succeeded in decoding the movement of hydrogen ions in crystals – a key step towards more efficient energy conversion in the hydrogen industry of tomorrow.

As charge carriers, electrons and ions play the leading role in electrochemical energy storage devices and converters such as batteries and fuel cells. Proton...

Im Focus: A unique data centre for cosmological simulations

Scientists from the Excellence Cluster Universe at the Ludwig-Maximilians-Universität Munich have establised "Cosmowebportal", a unique data centre for cosmological simulations located at the Leibniz Supercomputing Centre (LRZ) of the Bavarian Academy of Sciences. The complete results of a series of large hydrodynamical cosmological simulations are available, with data volumes typically exceeding several hundred terabytes. Scientists worldwide can interactively explore these complex simulations via a web interface and directly access the results.

With current telescopes, scientists can observe our Universe’s galaxies and galaxy clusters and their distribution along an invisible cosmic web. From the...

Im Focus: Scientists develop molecular thermometer for contactless measurement using infrared light

Temperature measurements possible even on the smallest scale / Molecular ruby for use in material sciences, biology, and medicine

Chemists at Johannes Gutenberg University Mainz (JGU) in cooperation with researchers of the German Federal Institute for Materials Research and Testing (BAM)...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Plants are networkers

19.06.2017 | Event News

Digital Survival Training for Executives

13.06.2017 | Event News

Global Learning Council Summit 2017

13.06.2017 | Event News

 
Latest News

Quantum thermometer or optical refrigerator?

23.06.2017 | Physics and Astronomy

A 100-year-old physics problem has been solved at EPFL

23.06.2017 | Physics and Astronomy

Equipping form with function

23.06.2017 | Information Technology

VideoLinks
B2B-VideoLinks
More VideoLinks >>>