1. A new pricing policy Long-term versus short-term thinking Adapted from AdPrin.com

2. A new pricing policy You are a retailer. You learn about a new pricing policy “P-plan” that you could implement at virtually no cost and the effects on long-term sales would be negligible. 1. Customers say they believe the P-plan is more honest. 2. It would save time and reduce confusion for customers and retail clerks. 3. It would improve your image as a quality retailer. Should you adopt this new pricing policy? ___ YES ____ NO ___NOT SURE Adapted from AdPrin.com 2

3. The plan might increase very short-term profit, but reduce long-term profits. Adapted from AdPrin.com 3

4. Use round prices (1.4.2) This will build long-term relationships. Of customers, 66% prefer even prices, and 13% prefer odd. Odd prices take 1/3 time longer to think about and even university students are led to substantial errors. Round prices imply higher quality: Kmart uses odd prices on 99% of its items while Nieman Marcus uses it on 16% (Persuasive Advertising p 44) 4

5. Should the Bose Wave Radio have a round price? See the next slide for the answer.

6. Adapted from AdPrin.com Yes, Bose is a high-quality product. Round prices are associated with better quality perceptions for restaurants and other high-end products (Schindler and Wiman 1989 in Persuasive Advertising p 45). See AdPrin.com for more information. 6

7. Based on this exercise, write a small application step for yourself, and set a deadline, preferably within one week. If you are working with someone else, share your application plan and the results of your application. For example, think about your objectives. If you only need to success in the short term, odd pricing has been found to increase sales in the short term (Persuasive Advertisingp 44). If you would like to emphasize quality, use round prices. Adapted from AdPrin.com