Odd-Even Pricing in Marketing
What Is It?
Odd-Even Pricing is a psychological pricing strategy that leverages the human tendency to perceive prices ending in odd numbers (like $9.99) as significantly lower than prices rounded to the next whole number (like $10.00), and to associate even, rounded prices with quality and luxury [1] [2]. The strategy is a deliberate attempt to influence a customer's perception of value and price point.
The most common form of this strategy is charm pricing, where prices end in a 9, 99, or 95. The difference between $19.99 and $20.00 is only one cent, but psychologically, the consumer focuses on the leftmost digit, perceiving the price as being in the "teens" rather than the "twenties." This phenomenon, known as the left-digit effect, makes the odd-priced item appear to be a better deal, often encouraging impulse purchases [1]. Conversely, prices ending in a zero or a five, such as $50.00 or $1,500, are often used for premium or luxury goods, as the rounded number signals a higher quality and value that is not associated with a discount [1].
For example, a retailer like Kay Jewelers, which focuses on mass-market affordability, frequently uses odd pricing (e.g., $199.99 or $59.49) to signal a deal and encourage volume sales. In stark contrast, a luxury brand like Tiffany & Co. exclusively uses even, rounded prices (e.g., $2,200) to reinforce its image of exclusivity and premium quality, appealing to customers who are not primarily price-sensitive [1]. The choice between odd and even pricing is a powerful tool for shaping brand perception and targeting specific customer segments.
How It Works
The effectiveness of odd-even pricing is rooted in several cognitive biases and psychological mechanisms that influence how consumers process and react to price information.
| Mechanism/Theory | Explanation | Psychological Effect |
|---|---|---|
| 1. The Left-Digit Effect | Consumers read prices from left to right and anchor their perception of the price on the first digit they encounter. A price of $19.99 is encoded as "nineteen-something," which is perceived as a greater distance from $20.00 than the actual one-cent difference. | Anchoring Bias and Magnitude Perception |
| 2. Value and Discount Signal | Odd prices (especially those ending in 9s) have been historically and culturally associated with sales, discounts, and promotions. This conditioning leads consumers to automatically perceive an odd-priced item as a bargain or a good deal. | Heuristic Processing and Conditioning |
| 3. Quality and Luxury Signal | Even, rounded prices (e.g., $100, $500) are often used for high-end or luxury products. The lack of a "discount" digit signals that the product's value is fixed and non-negotiable, reinforcing a perception of premium quality and prestige. | Price-Quality Inference and Perception of Exclusivity |
| 4. Cashier Accountability (Historical) | The original reason for odd pricing in the early 1900s was to force cashiers to open the till to make change, thereby creating a record of the sale and preventing theft. This historical practice has since evolved into a powerful psychological cue for consumers. | Historical Association and Perceived Honesty |
Quote from a Popular Marketer
"Perhaps the reason price is all your customers care about is because you haven't given them anything else to care about." — Seth Godin [3]
10 Tips on How to Use It in Marketing
- Use Odd Pricing for Value and Volume: Apply prices ending in .99 or .95 to products where you want to drive high volume, encourage impulse buys, or position the item as a great value. This is ideal for mass-market goods, promotional items, and low-cost accessories.
- Reserve Even Pricing for Premium Products: Use rounded, even numbers (e.g., $100, $50) for luxury items, high-end services, or products where quality and prestige are the primary selling points. This reinforces the perception of a premium, non-discounted offering.
- Leverage the Left-Digit Drop: Maximize the left-digit effect by ensuring the odd price drops the price to the next lower dollar or ten-dollar mark (e.g., $49.99 instead of $50.00, or $999 instead of $1,000). This is the most powerful psychological trigger.
- Test Odd Pricing for Impulse Buys: Place odd-priced items near the checkout or in high-traffic areas. The perceived low price and sense of a "deal" can bypass rational decision-making and trigger quick, unplanned purchases.
- Use Even Pricing for Complex Decisions: For high-ticket items or B2B services that require a rational, considered purchase (e.g., enterprise software, consulting), use even pricing. The round number suggests transparency and professionalism, aligning with a logical decision process.
- Apply Odd Pricing to Sales and Promotions: Clearly mark down prices to an odd number during sales events (e.g., "Was $50.00, Now $39.99"). This visually emphasizes the discount and activates the consumer's "deal-seeking" mindset.
- Match Pricing to Brand Identity: A discount retailer should consistently use odd pricing to align with its brand promise of affordability. A high-fashion or boutique brand should stick to even pricing to maintain its luxury image. Inconsistency can confuse customers.
- Use Odd Pricing to Encourage Larger Purchases: When customers are presented with a shopping cart full of odd-priced items, it becomes harder for them to quickly calculate the total, leading them to estimate and potentially purchase more than they would with easily-summable even prices [1].
- Employ Even Pricing for Subscription Tiers: For monthly subscription services, even pricing (e.g., $10/month, $50/month) often works better, as it simplifies the value proposition and long-term budgeting for the customer, suggesting a stable, predictable service.
- Combine with Anchoring: Use a high, even-priced anchor (e.g., a "deluxe" option at $1,000) to make a slightly lower, odd-priced option (e.g., a "standard" option at $799) seem like an incredible bargain, leveraging both odd-even pricing and the anchoring bias.