Running head: LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
The influence of language on the customers’ sensitivity to odd pricing:
The clothing industry
Submitted by
Chloé Ngassa Njonga
Supervisor
Ralf Wagner
Kassel, 21/10/12
1
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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TABLE OF CONTENTS
Table of Contents ..........................................................................................................2
Abstract .........................................................................................................................3
Introduction...................................................................................................................4
Hypotheses ....................................................................................................................7
Methodology .................................................................................................................8
Review of Literature ...................................................................................................10
Overview of Chapters .................................................................................................14
Bibliography ...............................................................................................................16
Timeline ......................................................................................................................18
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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ABSTRACT
Background
The odd pricing effect was born during the 19th, and was not initially related to a
marketing purpose. Through numerous experiments, its effectiveness has been
confirmed. Nowadays, this practice has been developed and used by marketers in
brick-and-mortar businesses. Furthermore, with the advent of electronic commerce,
the use of an odd pricing strategy has been extended to online businesses.
Research question
How does the mother tongue influence the customer’s sensitivity to odd pricing in
the clothing industry?
Purpose
The present study is designed to introduce the language as a factor influencing the
customers’ sensitivity to odd prices and to determine to which extent the mother
tongue has an impact on consumers’ awareness of this effect. This will contribute to
explain how the pricing strategy of multilingual website should be adapted for each
language and culture.
Method
In order to analyze the influence of the mother tongue on the customers’ sensitivity
to odd pricing, a quantitative study will be conducted and both primary and
secondary data will be used. A web experiment will be done in both French and
English, to French-speaking consumers and English-speaking consumers of all age
groups.
Key words
Language, Odd pricing, French-speaking consumers, English-speaking consumers,
Clothing industry.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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INTRODUCTION
With almost 2.5 trillion users in 2012, Internet has reached a growth rate of more
than 500% the past ten years; 2000-2012 (Internetworldstats, 2012). Furthermore, it
is nowadays an important tool used by companies in order to reach their customers,
with the development of electronic commerce. As shown in the figure below, the
B2C sales provided by the internet are growing over the years, and the trend of the
next four coming years will be a continuous growth.
B2C E-commerce sales worldwide (2011-2017)
Billions
$2 054,13
$1 859,75
$1 654,88
$1 444,97
$1 221,29
$1 042,98
$856,97
2011
2012
2013 (prev) 2014 (prev) 2015 (prev) 2016 (prev) 2017 (prev)
Source: Emarketer, June 2013
Figure: B2C E-commerce sales worldwide
According to the survey conducted by the Nielsen Company in 2010 with more than
27.000 internet users all around the world, one of the top 5 products/services global
consumers expect to purchase online in the next 6 months is “Clothing, accessories
and shoes” (Nielsen, 2010). The fashion market represents thus a significant part of
online markets.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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When selling online, the price is an important factor to take into consideration in
order to attract customers and to lead to a buying decision. The competitiveness of
prices is one of the reasons why consumers will rather shop online than going to
physical businesses. Thus, it is crucial for each company to adopt a pricing strategy
which corresponds to the customers’ expectations. One of the pricing strategies used
by online fashion retailers is called the odd-even pricing strategy.
After running out of pennies in the USA in 1875, Melville Stone, the founder of the
newspaper “Chicago Daily News” was forced to sell his newspaper at 99 cents
instead of a dollar, as it used to be (Kemp, 2012). This surprisingly had a positive
effect on the sales and further lead to its use for a commercial purpose, with a
practice called psychological pricing. While purchasing, customers usually do not
have all the useful information in order to assess if they are buying a product or a
service at a good price. Furthermore, they might lack of time, motivation or ability,
to make comparisons or to do some research before buying a product. They will then
make up their mind based on some cues that indicate whether the price is too high or
too low (Kotler & Armstrong, 2012). The numerical difference between a price of
399 and 400 may be only 1, but the psychological difference may be larger, some
people will tend to assess 399 as being 390 or 350 or even 300.
Nowadays, the odd-even pricing is one of the most used psychological pricing
strategies. It refers to a “a type of psychological pricing where price is set based on
customers’ perception of a significant difference in cost between products priced at a
whole number value and products priced slightly below this whole number” (Christ,
2012, p.267). In this paper, odd prices are just under round numbers and may refer to
three different categories: 99cents-ending prices like 0.99, 5.99 or 19.99, 9centsending prices like 1.29, 10.59 or 39.89 and 9-ending prices like 9, 39 or 299, whereas
even prices are round numbers like 1, 20 or 300. This method has already proved its
effectiveness for companies, as it leads to an increase of companies’ sales (Anderson
& Simester, 2003) or more specifically to an increase of the purchase amount of each
customer (Legohérel, Guégen & N’gobo, 2013). However, the use of odd pricing is
rarely combined with other elements.
In order to reach many customers, some online businesses have gone multilingual
and are thus available in many languages and in different countries. However, the
translation of websites is usually not enough and in order to be successful, the
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
6
internationalization of a commercial website requires the adjustment of the language
as well as the culture of each country (Nantel & Glaser, 2008). Culture may also
have an impact on the pricing strategy (Ackerman & Tellis, 2002).
Based on this evolution of electronic commerce, this paper will investigate whether
the odd pricing strategy might have the same impact regarding whether consumers
are shopping on a website available in their mother tongue or a website which is not.
The present study is designed to introduce the language as a factor influencing the
customers’ sensitivity to odd prices and to determine to which extent the mother
tongue has an impact on consumers’ awareness of this effect. This will contribute to
explain how the pricing strategy of multilingual website should be adapted for each
language and culture.
In a first step, I will review the different theories that have been used so far in order
to analyze the odd pricing effect and the multilingualism of websites, with a
theoretical framework. In a second step, I will explain the methodology that I used to
assess this language influence through a web experiment. Further, the results of the
experiment will be given with more details and they will be analyzed, and I will
conclude with the scientific and managerial implications of the results obtained for
nowadays companies, as well as the limitations of such a study.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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HYPOTHESES
For the purpose of analyzing the research question, the hypotheses will be divided in
three parts.
The first part will be focused on the odd pricing effect and the following general
hypotheses will be made:
H1a: French-speaking people are sensitive to odd pricing in the clothing
industry
H1b: English-speaking people are sensitive to odd pricing in the clothing
industry
Furthermore, I will take the clothing industry as a whole and thus assume that the
results will be equal among the clothing categories. I formulated the following
hypotheses:
H1c: The odd pricing effect does not differ depending on the clothing category:
clothes, shoes or accessories.
In the second part, I will analyze the effect of the language on the buyers’ final
decision. The hypotheses are the following:
H2a: When shopping in a website available in their mother tongue, people pay
more attention to the characteristics of the product.
H2b: When shopping in a website in a language different than their mother
tongue, people pay more attention to the brand reputation of the product.
Finally in a third part, I will combine both the odd pricing effect and the language to
come out with the following hypothesis:
H3: People are more sensitive to odd pricing when shopping in a website in their
mother tongue.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
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METHODOLOGY
Participants
The participants of the study will be men and women of all age groups having French
or English as mother tongue and using electronic commerce. There will be four
groups of 30 respondents each; two groups of French-speaking people and two
groups of English-speaking people.
The study will be based on three different clothing categories: Clothes, shoes and
accessories.
Process
With the purpose of verifying the hypotheses, a web experiment will be made and
will consist of three parts. Moreover there will be two different versions of the
experiment, as the respondents will firstly be asked whether they are used to buy
female or male clothes. They will be then redirected to the three parts of the
experiment.
1. The odd pricing effect
In order to test the hypotheses 1a, 1b and 1c, the participants will have a web page
screen with different clothing items of all categories (clothes, accessories and shoes)
and with odd prices. They will be asked to choose a set of items. Later on, they will
be asked in a different page about the price of each of the items they had chosen
without having access to the first page with those prices. This will help to apply the
theory of cognition, especially the left-digit effect, as to what extent the consumers
will have remembered the digits of the prices.
2. The mother tongue effect
To test the hypotheses 2a and 2b, the participants will have various branded and nonbranded items with their features. In a first stage, they will have the features in a
language different than their mother tongue and they will be asked to estimate the
product prices. Then, they will have the same products but this time with the features
in their mother tongue and they will also be asked about an estimation of prices.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
9
3. The influence of the language on the odd price sensitivity
To verify the last hypothesis, the respondents will be divided in 4 categories. The
first category will be French-speaking consumers with a French page. The second
one will be French-speaking consumers with an English page. The third category will
group English-speaking consumers with an English page and the last category
English-speaking consumers with a French page.
Running head: LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
10
REVIEW OF LITERATURE
Topic
Odd
Pricing
Title
Effet des prix à
terminaison 9 sur le
choix
des
consommateurs
(9-ending
prices
effect
on
the
consumers’ choice)
Author (s)
*Patrick Legohérel
*Nicolas Guégen
*Paul-Valentin
N’gobo
Year Source
2013 La Revue des Sciences de
Gestion
17-25
(Journal of Management
Sciences)
Odd
Pricing
Not
all
price
endings are created
equal: Price points
and
asymmetric
price rigidity
Principles
of
marketing
*Avichai Snir
*Daniel Levy
*Alex Gotler
*Haipeng Chen
2012 Munich Personal Research
Paper Archive
*Philip Kotler
*Gary Armstrong
2012 Book
320-321
Odd
pricing
Odd
Pricing
The influence of *E. S. Asamoah,
price endings on
*M. Chovancova
consumer behavior:
2011 Journal « Acta universitatis
agriculturae et silviculturae
mendelianae brunensis »
Content
9-ending prices lead to an increase of the medium amount of
purchase, they have a positive effect on new products, they are more
efficient when they are mixed with even prices, they have an effect
on the consumers’ choice when they already have a brand
preference.
Consumers underestimate 9-ending prices, they pay more
attention to the left digit of the price, and this digit has an influence
on the final buying decision.
There is a link between 9-ending and price rigidity.
9-endings prices are more rigid than other price endings
upwards but not downwards. It is thus important to have 9-ending
prices in case of price increase, but to avoid it in case of price
reduction.
Price adjustment strategies.
Through psychological pricing, not only the economic
value of price is taken into consideration, also the psychological.
While purchasing, customers usually do not have all
the useful information in order to assess if they are buying a product
or a service at a good price.
Use of the theory of perception to underline the psychological
impact of price endings on consumers.
For consumers, odd prices are cheaper than even prices,
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
Odd
Pricing
an application
Volume LVX 29-38
of the psychology
of perception
Consumer
*Charlotte Gaston- 2011 Working Paper
preferences for 99- Breton
ending prices:
The mediating role
of
price
consciousness
Odd
Pricing
Internationalization
of pricing strategy
*Naree
Kupadakvinij
*Saruta Cholviroj
2010 Master thesis
Odd
pricing
Image Effects and *Dongwon Lee
Rational
*Robert J.
Inattention in
Kauffman
Internet-Based
*Mark E. Bergen
Selling
2009 International Journal of
Electronic Commerce, 4,
127-165
Odd
Pricing
The Effects of *Shih-Chieh
Nine-ending Prices Chuang
and the Need for *Chaang-Yung
2009 Advances in consumer
research, 36, 973-975
11
especially for fast moving goods.
Price endings may have a great influence on sales.
Why, who and when consumers rather choose odd prices?
Consciously, consumers assess 99-ending prices as a
sign of a « good deal », whereas unconsciously, they tend to round
it down.
99-ending prices preference is a decreasing function of
involvement or education level, whereas it is an increasing function
of age and income.
The preference for 99-ending prices depend on the
product and brand characteristics.
Is there a difference on the 9-ending promotion prices used by Thai
and Swedish retailers?
There is a difference between the way Thai and
Swedish retailers use left and right digits.
There is a difference between promotion prices among
category and sub-category.
To which extent, 9 ending prices occurred on internet-based selling,
and what are the factors that lead the firms on electronic commerce
to choose this pricing strategy?
Online firms use more odd prices for lower-priced
items.
When the number of digits increases, the proportion of
odd prices decreases and the proportion of even prices increases.
The need of cognition which is “the tendency for
people to engage in and enjoy thinking”, is a factor that may have
an impact on the customers’ perception of 9-ending prices.
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
Cognition in Price Kung
Cognition
*Yin-Hui Cheng
*Shu-Li Yu
Odd
pricing
The effect of priceending on
luxury
and
necessity
Odd
pricing
Price
endings
strategies
and
managerial
perspectives
Odd
Pricing
Identifying patterns
of
customer
response to price
endings
12
People with high need for cognition enjoy the
purchasing process and may more easily avoid the odd pricing
effect whereas people with low need for cognition do not like
thinking and may be sensitive to that effect.
*Chen Chen Zheng 2008 Master Thesis
Do price endings have an impact on the perception of luxury and
necessity goods?
Price endings have some level effects: underestimation,
left-to-right comparison, or limited memory capacity.
Even prices have a greater cognitive accessibility than
odd prices
Price endings have some image effects: price effect and
quality effect.
*H.G. Parsa
2007 Journal of services research, Find a theoretical explanation of the use of the odd-even pricing
*Sandra Naipaul
7
strategy in restaurants.
9-ending prices are most used for lower priced items.
The more expensive the item is, the more often we encounter the
use of 0-ending prices.
To preserve the image of some prestigious restaurants,
0-ending prices will be used more often whereas 99-ending prices
will be used in quick-service restaurants, to promote their highvalue products.
*Ralf Wagner
2006 Journal of product and
There are some conflicting results on the effectiveness
*Kai-Stefan Beinke
brand management, 15/5,
of the odd pricing strategy, thus its use should be customized to
341-351
each market.
The image effect of odd pricing is higher than its level
effect.
Odd prices did not achieve the expected effect on
market share, it is thus important to check the threshold of each
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
Odd
pricing
The
99
price *Robert M.
ending as a signal Schindler
of a low-price
appeal
2006 Journal of retailing, 71-77
Odd
pricing
Pricing:
making *Kent B. Monroe
profitable decisions
2005 Book
113-114
Language
and
culture
The Impact of *Jacques Nantel
Language
and *Evelyne Glaser
Culture
on
Perceived Website
Usability
2008 Journal of engineering and
technology management,
25. 112-122
Language
and
culture
Can culture affect *David Ackerman
prices? A cross- *Gerard Tellis
cultural study of
shopping and retail
prices
2001 Journal of retailing, 77, 5782
13
brand individually.
What do 99-ending prices really mean for consumers?
Introduction of the “99-meaning paradox”, there is a
discrepancy between the 99-meaning which is communicated to the
consumers and its actual or real meaning.
The 99-ending prices are a signal of a low price for
consumers, especially because retailers usually associate those
prices with cues (on sale, discount…
Analysis of the effect of odd prices.
Perceptual effects: people read prices from left to right
an usually do not recall prices
Cognitive effects: Odd prices are assigned to low
quality, sale or discounted prices, and fair prices.
The users perceive a greater usability of a website when
it is originally in their mother tongue.
If the website is translated, no matter how good the
translation is made, they will perceive a distance.
A website should be adapted to the culture of its
customers.
“A website becomes user friendly when the minds of the designers
and the users meet, (…)”
Does the cultural orientation leads to differences in consumer
behavior while shopping or in the prices of grocery stores?
Comparison with China and the USA.
Differences across culture and languages are not
important enough for companies to adapt or change their marketing
strategy. (Levitt, The globalization of markets)
Running head: LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
14
OVERVIEW OF CHAPTERS
The structure of the thesis will be adapted according to the ongoing research on the topic. The
preliminary outline of the thesis is the following:
Abstract
Table of contents
List of tables
List of figures
List of abbreviations
Chapter 1: Introduction
1.1 Background
1.2 Statement of the problem
1.3 Purpose
1.4 Thesis structure
Chapter 2: Theoretical Framework
2.1 Psychological pricing and the theory of perception
2.2 Odd pricing
2.3 Theory of cognition
2.4 Cross-cultural communication
Chap 3: Methodology
3.1 Web experiment
3.1.1 The odd pricing effect
3.1.2 The mother tongue effect
3.2 Qualitative research
Chap 4: Results and Analysis
Chap 5: Conclusion
5.1 Implications
* Scientific implications
* Managerial implications
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
5.2 Limitations
5.3 Future research
Chap 6: References
15
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
16
BIBLIOGRAPHY
Ackerman D. and Tellis G. (2001). Can culture affect prices? A cross-cultural study of
shopping and retail prices. Journal of retailing, 77, 57-82
Anderson E. T. and Simester D. I. (2003). Effects of $9 price endings on retail sales:
evidence from field experiments. Quantitative Marketing and Economics, 1, 93-110
Asamoah E. S. and Chovancova M. (2011). The influence of price endings on consumer
behavior: an application of the psychology of perception. Acta Universitatis
Agriculturae et Silviculturae Mendelianae Brunensis, LVX, 29-38
Chuang S., Kung C., Cheng Y. and Yu S. (2009). The effects of nine-ending prices and the
need for cognition in price cognition. Advances in Consumer Research, 36, 973-975
Gaston-Breton C. (2011). Consumer preferences for 99-ending prices: The mediating role of
price consciousness. Business Economics Series 03, 1-36
Internet usage statistics: World internet usage and population statistics June, 30 2012 (2012).
Retrieved from http://www.internetworldstats.com/stats.htm
Kotler P. and Armstrong G. (2012). Principles of marketing. New Jersey, NJ, Pearson
Education
Kupadakivnij N. and Cholviroj S. (2010). Internationalization of pricing strategy
(Unpublished master’s thesis). School of Sustainable Development of Society and
Technology,
Lee D., Kauffman R. J. and Bergen M. E. Image effects and rational inattention on internetbased selling (2009). International Journal of Electronic Commerce, 4, 127-165
Legohérel P., Guégen N. and N’gobo P. (2013). Effet des prix à terminaison 9 sur le choix
des consommateurs. La Revue des Sciences de Gestion, 261-262, 17-25
Lindsay P. H. & Norman D. A. (1977). Human information processing: An introduction to
psychology (2nd ed). New York, NY, Academic press
LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
17
Mc Carthy E.J. (1960). Basic marketing: A managerial approach (1st ed.). Homewood, IL,
Richard D. Irwin
Monroe K.B. (2005). Pricing: Making profitable decisions. Taiwan, McGraw-Hill Irwin
Nantel J. and Glaser E. (2008). The impact of language and culture on perceived website
usability. Journal of Engineering and Technology Management, 25, 112-122
Nielsen global consumer report: Global trends in online shopping June 2010(2010). Retrieved
from http://hk.nielsen.com/documents/Q12010OnlineShoppingTrendsReport.pdf
Parsa H. G., Naipaul S. (2007). Price endings strategies and managerial perspectives. Journal
of services research,7
Pride W. M. & Ferrell O. C. (2012). Marketing. Mason, OH, South-Western Cengage
Learning
Schindler R. M. (2006). The 99 price ending as a sign of low-price appeal. Journal of
retailing, 71-77
Snir A., Levy D., Gotler A. and Chen H. (2012). Not all price endings are created equal: Price
points and asymmetric price rigidity. Munich Personal Research Archive, 42252,
Wagner R. and Beinke K. (2006). Identifying patterns of customer response to price endings.
Journal of Product and Brand Management, 15/5, 341-351
Worldwide B2C Ecommerce: 2013 Forecast and Comparative Estimates (2013). Retrieved
from https://www.emarketer.com/Coverage/ConsumersEcommerce.aspx
Zheng C. C. (2008). The effect of price-ending on luxury and necessity (Unpublished
master’s thesis). University of Canterbury, New-Zealand
Final presentation and report of the
study is made
The conclusion of the study is written,
with its limitations and further
research that may be implemented
Intermediate presentation and report
of the study is made
An analysis of the results obtained
through the survey is made.
The survey has been pre-tested and
can now be sent to customers.
21/10/2013
A survey is going to be made involving
French and English-speaking
consumers in order to analyse their
behavior towards pricing when
shopping online.
04/09/2013 05/09/13-20/10/13
Deadline for handing the exposé, this
includes writing an abstract, a review
of literature, some hypotheses, the
methodology which is going to be
used and an overview of the chapters
of the intermediate report.
Articles, books and previous research
on the topic are analysed and
summarised.
Skype meeting with the coordinators
leading to a choice of one topic
among the 3 proposed.
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Running head: LANGUAGE INFLUENCE ON ODD PRICING SENSITIVITY
18
TIMELINE
22/10/13-03/11/13 15/11/13-15/12/2013 16/12/13-16/01/13 19/01/2013-23/01/13 10/02/13-11/04/13 25/05/13-31/05/13