As a continuation of our series on different pricing strategies and pricing methods, in this post we'll take a deeper look at Odd Even pricing. This pricing strategy looks at the psychological effect that numbers have on the human brain, then uses that power to shape price perception.
Curious about the other strategies in this pricing series? Scroll to the bottom of the post to find links to other strategy-related posts.
What is odd even pricing?
Odd-even pricing (also called psychological pricing) refers to a pricing method that’s similar to charm pricing. It’s the strategy of odd-even pricing utilizes a psychological appeal of the numbers that are displayed in a price.
What is odd pricing
The “odd” in odd pricing refers to the odd number at the end of a price. Odd prices typically use endings like €0.99 or €0.95 to signal specificity.
What is even pricing
Even prices are the exact opposite: they end in an even number or zero. An example of an even price would be €20 or €1.50.
Odd even pricing examples
You don’t need to look far to find great examples of odd number pricing. But some of the best are found in late-night infomercials.
The charm of these commercials is in their delivery of course, and the packaging and bundling is expert. But one of the (many) elements that make these commercials so effective is the use of odd pricing. The pricing scheme is presented along with strategic bundling and classic scarcity tactics to create an incredibly convincing reason to call now and order these products.
Even pricing examples are nowhere near as prevalent as odd prices. And that notion is confirmed by some odd-even pricing statistics. When you look at odd even pricing statistics, it’s easy to see that even pricing has long been overshadowed by odd pricing.
According to a 1997 study, the most common ending numbers for a price were 9 and 5. These two numbers accounted for a whopping 90% of the prices they analyzed. Just the 9-ending alone dominated 60% of the data set! It’s no wonder that even prices feel underutilized — they are rare to find!
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Psychological pricing advantages and disadvantages
Does odd even pricing work?
The answer is a resounding yes. The effects of odd even pricing more psychological than tangible. Even though there’s no real difference between €19.99 and €20.00, the two prices feel very different. However, psychological pricing does have its advantages and disadvantages.
The biggest pro of psychological pricing is the amount of control it gives you over your brand and price perception. When you understand how different numbers “feel” to consumers, you’ll be able to build a better marketing mix (which includes pricing) that is strategic. You can use the power that these deeply-held feelings have to subtly influence the way people look at your products.
However, this power behind psychological prices is also the biggest con for odd even pricing. The feelings that different numbers give consumers are deeply-rooted; it will be hard for any company to break these molds. If you don’t understand how an odd even pricing strategy works, you may accidentally harm your brand.
How to build an odd even pricing strategy
So we’ve covered the basics of odd even pricing and the pros and cons of each method, but how do you actually use odd and even prices to your advantage? Here are some starting ideas.
Use even prices, but give odd discounts
If you want your offer to feel like a discount, a great strategy is to present the product at an even price, then offer an odd-priced discount. An example of this may be discounting a €16 shirt down to €14.99. You can also mix this with a high runner strategy to optimize for the most popular products on the market.
Related: Everything You Need to Know about the ROPO Effect
Create memorable prices
Consumers are used to prices that end in 9’s and 5’s, so much so that these prices have lost their “sticking” power.
If you want your price to stand out, try advertising it at a less-frequently used odd price. For example, instead of pricing a lamp at €25.99, try selling it at €23.99. This number will leap off the page to shoppers and you’ll be able to capture their attention.
Want to take it a step further? Try advertising at an even price that really stands out. When you make your price seem precise, consumers believe they are getting the most up-to-date price on the market.
Luxury brands and odd even pricing
If you’re a luxury retailer, you may want to consider using even prices rather than odd prices, especially on new items that gain a lot of attention and boost your brand perception.
Since odd prices are so popular, consumers often equate these psychological numbers with sales. Because of this, many luxury retailers eschew odd prices and choose to go with more "whole" even prices.
So, to conclude, what are the best numbers to use for pricing?
When choosing between even ended pricing versus odd ended pricing, the answer is disappointingly simple: it depends on your commercial objective and goals. Odd-even pricing is considered to be a rather effective approach to pricing, but you will only reap the benefits of this strategy if you align it to your commercial ambitions.
If you want to be seen as a luxury retailer, chances are you will want to use even prices. These rounded numbers give a sense of “wholeness” to the price.
However, for most retailers an odd pricing strategy makes the most sense. Consumers are so used to odd numbers that even numbers may feel too expensive, depending on your category.
In the end, do some research on your competitors to see what they do, then decide if their pricing aligns with your goals.