ISSN 1028-9488 Journal of Grey System, Vol. 15, No. 3, (2012) 159-164
The Effect of Odd-even Pricing Strategy on Consumer’s
Sensitivity – Application of GRA on Evaluation Model of SAC
Chaang-Yung Kung and Hsiu-Wei Hsu
ABSTRACT
A majority of studies on studies on pricing strategy
in recent years concentrated on the effect of odd-even
pricing strategy on consumer’s price recognition.
However, rarely do studies concentrate on whether
consumers have different sensitivities on “odd-even
pricing” strategy under a wide variety of promotion
conditions. Such as the effect of nine-ending prices in
other conditions has not yet been examined. The
objectives of this study are to explore the effects come
up with the namely separate assessable condition by
means of the adoption of odd-even pricing model.
Applying grey relational analysis for data analysis, the
research intends to examine how consumers would
react as confronted with odd-even pricing strategy in
separate assessable condition. The finding of this study
will allow retailers to get access to the way how to adopt
odd-even pricing strategies to influence consumer’s
price perception.
Keywords: Pricing strategy, Consumer’s price
sensitivity, Odd-even pricing, Grey relational
analysis, Separate assessable condition.
1. Introduction
Schindler [3] provided evidence of the effectiveness
of nine-ending prices by means of the drop-off
mechanism, and Thomas and Morwitz [4] found
evidence of a left-digit effect. However, these studies
examined nine-ending prices independently of
zero-ending prices, and they often do not correspond
to real purchasing settings, for example, whether
nine-ending pricing influences actual purchasing
decisions when nine-ending and zero-ending prices
are presented side by side (e.g., product prices printed
on DM or in-store shelves). In other words, the effect
of nine-ending prices in other conditions has not yet
been examined and rarely researches explore whether
nine-ending pricing influences actual purchasing
decisions when consumers face to different evaluation
conditions under the situation to evaluate nine-ending
and zero-ending prices separately, or evaluate both
simultaneously.
The present study is developed and applies grey
relational analysis (GRA) to examine the effect of
nine-ending pricing on consumer magnitude
perception under separate assessable condition (SAC)
in order to support the hypothesis proposed.
2. Review of Literatures
Various experimental conditions in the literatures
have been constructed to investigate the “odd-even
pricing” effect [1,2]. Such studies provide mixed
evidence on whether consumers perceive products
with nine-ending prices to be much lower in price
than those with zero-ending prices in that the former
are one cent or dollar more than the latter. Previous
researchers had doubts about the effect of nine-ending
pricing on magnitude perception [2], while others
didn’t succeed in measuring the effect of nine-ending
pricing strategy on sales by means of the applications
of various statistic methods. In contrast, Bizer and
Corresponding Author: Chaang-Yuan Kung is with
the Department of International Business, National
Taichung University of Education, Taichung, Taiwan
Tel.: +86-4-22183358
Fax: +86-4-22183356
E-mail: [email protected]
Received: May 15, 2012
Revised: July 16, 2012
Accepted: August 01, 2012
One mechanism commonly proposed in support
of the effect of nine-ending pricing on magnitude
perception is the drop-off mechanism [5,6], or price
ending drop-off, which suggests that when people see
a price, they pay very little or no attention to the
ending digits. For example, when people see a price
of $299, they may perceive the price ending digits as
zero, making the price virtually equivalent to $200,
see the price as $300, or see it as significantly less
than $300. The last circumstance reflects the tendency
of people to drop off, or give less attention to, the
ending digits of a price. Bizer and Schindler [3]
developed a new experimental approach to
demonstrate numerical drop-off and avoid two major
causes of failures in research into the nine-ending
pricing effect: high variation among open-ended
responses in free-recall tasks [7] and unrealistic
conditions (e.g., respondents are given several
minutes to examine an advertisement showing only
one price in the study of Schindler and Kibarian [7].
Respondents in the study of Bizer and Schindler [3]
September 2012, Vol. 15, No. 3/159
TAO