A bit of retail knowledge from the research lab at Ohio State.
This is a very insightful finding. It would be interesting to find out the effect of the price difference (99 cents vs. $1) on volume though. Xavier Lederer
Ending prices that end in 99 cents by Al McClain in Retailwire. With further expert comment.
Retailers might want to rethink doing away with prices that end with “.99” if they believe the results of new research from researchers at The Ohio State University’s Fisher College of Business.
The study found that setting prices “just below” round numbers (i.e., $19.95, $19.97 or $19.99 instead of $20) can make consumers less likely to spend to upgrade to a more expensive version or size of the product or service.
In a coffee stand experiment done on campus, the researchers changed prices hourly, offering a small coffee for 95 cents, or a larger cup for $1.20. Every other hour they would change the offering to $1 for a small cup or a larger cup for $1.25, so both sizes of coffee cost more. When using the latter pricing scheme, 56 percent of customers upgraded to the larger size, versus 29 percent who did so with the first pricing scheme.
The researchers concluded that while the just-below price makes a product seem like a bargain, it also makes the step up to the premium product seem too expensive. ... '
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