What is Odd-Even Pricing? A Complete Guide to the Odd-Even Pricing Strategy

By Thomas Bennett Financial expert at Priceva
Published on March 23, 2023
Continuing their relentless research of buyers’ psychology, marketers use a large variety of psychological approaches to increase sales. There’s a 99.9% chance you’ve personally been influenced by one of them: it’s called “odd-even pricing.” This article explains how this pricing strategy works, shows examples of sellers using it, and describes the ways to implement it in online retail.

A Brief History of Odd-Even Pricing

How did odd-even pricing appear in the retail industry? One of the initial explanations behind this method is that it helped vendors prevent theft of goods. When products are charged in whole numbers, like $10 or $20, buyers usually don’t need change, which might give a seller the opportunity to simply steal the sum without opening the cash register. With the introduction of prices like $19.99, cashiers had to give change and record the transaction.

Later on, this idea gained traction when businesses and economists started researching customers’ buying habits and behaviors. It turned out that odd and even prices had a different impact on unconscious perception of product value.

The Psychology of Odd-Even Pricing

In order to comprehend how the odd-even pricing strategy applies to retail circumstances, let us dive into its psychological mechanisms. Practice shows that the last digits of a price may influence consumer perceptions exactly as much as, and sometimes even more, than the initial digits. Charm pricing, which exploits this tendency to make some prices look cheaper than they actually are, is one method of doing this.

Here’s how numbers in prices are perceived by human psychology:

  • Prices that finish in an odd number of cents, such as $7.99 or $124.95, might give the impression that you are saving money. Retail businesses frequently employ this unusual pricing approach in order to make a price seem lower. For buyers with a limited budget, non-sale products frequently end in an odd number of cents.
  • Evenly priced goods imply elegance and completeness. A price typically conveys a sense of completion when it finishes in a whole number. This is especially true when that entire number has an even numeric value. Even prices are frequently used by luxury shops. Even numbers are preferred by service providers like lawyers and tutors, whose rates typically end in zeros.

How Is It Used in Market Positioning?

If customers do regard odd-numbered prices as bargains, this approach should be implemented in your business’s pricing strategy. It is recommended for brands that want to position themselves as discount retailers and good value providers. Meanwhile, pricing with whole numbers (even numbers) makes more sense for businesses that want to display an image of being an upscale merchant or offer premium goods or services.

Odd-Even Pricing Examples

Men's Wearhouse (Odd Pricing)

One of the examples of odd-even pricing is Men's Wearhouse. For these specific sport jackets, the shop aggressively promotes bargains. Casting these jackets as high-end products is less important than getting rid of surplus stock cheaply. Therefore, the brand decided to emphasize that message by implementing unusual pricing.

Brooks Brothers (Even Pricing)

Premium apparel company Brooks Brothers tries to convey their reputation through the even price approach. Their customer base, which is prepared to ignore discounts in favor of what they perceive to be of superior quality, buys these jackets at full price. As a result, the business uses even pricing.

Mattress Firm (Combination of Odd and Even Pricing)

Mattress Firm is a brand that offers a large gamut of mattresses and targets different audiences. Thanks to its diverse assortment, it uses even pricing for higher-tiered goods in combination with bargains on cheaper models.

Retailer Pricing Schedules

Some sellers adjust the final digit of a product's price to emphasize how much it has already been reduced and whether it can be further discounted. One retailer with such a price plan is Target. Here’s how it works with pricing:

  • Products are reduced by increments of 15%, 30%, 50%, 70%, and lastly, 90%.
  • Prices with a 6 or 8 will be reduced once more during the following repricing cycle, which occurs around every two weeks.
  • Prices with a four-digit number, like $12.94, are in final clearance and won't be discounted further.

It seems that picking an odd price, which results in a dollar amount and cents, such as $3.95, has the most influence when compared to a full number, such as $10.00. However, when customers are comparing $7.99 and $7.98, the distinction between odd and even cents doesn't matter as much.

Empower Your Business with Priceva's Price Tracking Solution
Take charge of your pricing strategy with Priceva's powerful price tracking tools.

When to Use Odd-Even Pricing

Odd-even pricing involves more than just setting all of your prices to finish in .99. Even more deeply rooted aspects of the psychology of numbers affect how we judge the value of a brand or product.

Prices that finish in a 9 denote good value, whereas prices that end in a 0 denote a more expensive product. Utilizing the power of numbers allows you to gently place your items in the minds of consumers, but there is a danger that, if done incorrectly, you may wind up hurting your brand.

Odd pricing sometimes resonates as deals or reductions with value-conscious buyers, which encourages larger purchases and impulsive shopping. Most of these customers spend less time determining whether to make the purchase or not and are less worried about the danger of buying more than they need since they believe they are receiving a good bargain.

Odd pricing might not be for you, though, if you're searching for quality-conscious customers with high retention potential. Using pricing that finishes in even numbers would be more appropriate for businesses that wish to be perceived as more of a high-end brand, or that offer premium goods or services. For example, you can often see companies like Dior or Gucci using even pricing.

Advantages and Disadvantages

Odd-even pricing can boost sales, but only if implemented properly.

Pros

  1. It encourages impulsive shopping. Since buyers will perceive a price like "$9.99" as being inexpensive, they may be encouraged to make an impulse purchase. Customers sometimes see strange pricing as a discount, so when they see the odd numbers, they might not hesitate to buy a product.
  2. It promotes bigger purchases. Customers are more inclined to make greater purchases since they believe they are receiving a better deal. Additionally, ending your prices with an odd number makes it harder for customers to calculate the final amount. People usually end up underestimating and making more purchases.

Cons

  1. Damaged LTV and perception. LTV and retention are negatively impacted by customers who buy because they believe they are getting a discount. They are most likely to purchase just once, and do so simply in response to the seeming discount. This does not apply, however, if you run a business in retail or another industry that depends on one-time sales. However, with SaaS, you need a pricing plan that increases LTV and retention.
  2. Wrong sense of value. If you choose to discount in even numbers, buyers may think you are a premium shop, and if you choose to end prices in odd numbers, they may think you are a bargain retailer. As long as you carefully choose a price that corresponds to the worth of your product, this can be avoided.

How to Build an Odd-Even Pricing Strategy

After reading about the drawbacks of odd-even pricing, you may be wondering how to craft a strategy that will communicate your product’s value in the right way. Here’s what you can do:

Make Your Prices Memorable

So, does this imply that nines and fives are the key to higher sales? Absolutely not, given how mainstream odd-even pricing has become. However, you can be more creative and select figures that will stick out and draw website visitors' attention. For example, how about charging $96.08 for your product?

Use Even Numbers but Give Odd Discounts

Offering the original price as an even number but then presenting the discount as an odd number helps you to display your items as though the discount is greater than it actually is.

This helps contextualize the discount by utilizing the psychology underlying both sets of prices. When compared to other discounted items on the same page from ASOS, the example below truly makes this product stand out.

Using Both Odd and Even Numbers

Additionally, you have the option of selecting both odd and even pricing. By differentiating between major and secondary product ranges or highlighting products that are on sale (for example, a product that has been reduced from €500 to €426), this strategy can assist brands with a wide product offering in attracting a more diverse mix of clients.

Conclusion

The odd-even pricing method helps companies improve their financial strategy and impact consumers’ pricing behaviors. However, this approach has certain advantages and disadvantages. The success of this strategy depends on how well it reflects product value and appeals to consumers’ purchasing preferences.

When experimenting with the odd-even approach, you can automate cost updates by implementing dynamic pricing software by Priceva. It will generate the best automatic price recommendations for you to make optimal decisions and optimize the outcomes of your pricing efforts.

FAQ

What was the initial reason for odd pricing?

Setting odd-even prices was initially done to have the cashier open the register to issue change and therefore record the sale.

Do odd or even prices sell better?

It depends, because they have a different psychological impact on price perception. Odd pricing makes products look like bargains, especially in sale prices. Even pricing appeals to buyers looking for top-tier options.

Why do companies use even pricing?

Prices that end in even numbers create a sense of completeness. They are often used for premium and luxury products, and aim to appeal to higher market segments.

Empower Your Business with Priceva's Price Tracking Solution
Take charge of your pricing strategy with Priceva's powerful price tracking tools.
More to explore