This document discusses a case study on consumer behavior and the influence of odd pricing (prices ending in 9) on buying habits. It provides background on the origins of odd pricing in the late 19th century and reviews research showing people perceive odd prices as significantly lower than even prices, even for small differences like $1.99 vs $2.00. The study measures consumer perceptions of prices ending in 9 vs 8 vs other numbers through surveys. Future research is proposed to better understand if the "image" or "rounding down" hypotheses explain why odd prices influence purchasing.

1. A Case Study in Consumer Behavior
About The Influence of Odd Pricing to the Buying
Behavior of Consumers in City of Binan Laguna
(Consumer Analysis Model: Affect and Cognition)

2. I. INTRODUCTION
Casual observation of advertised retail prices throughout Binan Laguna
highlights the prolific use of odd pricing, the practice of pricing just below the
nearest round number (for example, Php 99.99 instead Php 100, or Php 999.99
instead of Php1000). The popularity of prices ending in the digit 9 and, to a lesser
extent, the digit 5, reflects the belief that odd pricing will produce higher than
expected demand at the price level concerned. In other words, the assumed
demand curve is thought to be "kinked" upwards at odd price points.
According to Scot Morris’s Book of Strange Facts and Useless
Information, psychological pricing originated in Chicago in 1875, when Melville E.
Stone founded the Chicago Daily News with a purchase price of only one cent.
There was only one problem; there weren’t enough pennies in circulation, making
the purchase of Stone’s newspaper very inconvenient. He put the lack of pennies
down to the prevalence of pricing goods at even-dollar amounts for easy
arithmetic, and colluded with shopkeepers to lower prices by one cent (e.g to
$0.99 compared with $1.00). Those shopkeepers who agreed to aid Stone in his
efforts found that the practice increased sales, except there was an issue in
providing one-cent pieces as change. The solution was to ship barrels of pennies
in from Philadelphia to provide to customers as change. There was a cost
associated with this, but the shopkeepers believed that the benefit of having the
psychological pricing was above and beyond the cost of shipping in the pennies.

3. If this story is true, Stone’s plan must have worked, as the paper lasted 102
years before its eventual demise in 1978.
The tendency of retailers to price their products with a ".99" or ".98" ending
is ubiquitous in the marketplace. Instead of a jar of mayonnaise costing $3.00,
we usually see a price of $2.99. Late-night infomercials promote items that cost
$29.99, not $30.00. And even the tennis shoes we buy in the mall cost $79.99
instead of $80.00. Odd pricing, or setting prices for goods and services just
below a common or even price, has been an everyday practice for years.
Nonetheless, researchers still understand relatively little about whether this
practice is successful in increasing sales, and even less about the process
through which such odd pricing may benefit the bottom line.
What little research that exists regarding the odd-pricing effect can largely
be categorized into two groups: research that examines the effect of odd pricing
on purchases, and research that examines the potential mediators of odd pricing
effects. Researchers have demonstrated that people are more likely to buy or
think they would buy odd-priced items (e.g., Schindler & Warren, 1988; Schindler
& Kibarian, 1996). The mechanism, however, is less clear. Whereas some
evidence supports the notion that people "round down" and thus misperceive odd
prices (the "level hypothesis:" odd prices are perceptually rounded down;
Schindler & Wiman, 1989), other research suggests that the mere image of odd
prices makes products seem less expensive (the "image hypothesis:" odd prices
are used as a heuristic that the product is less expensive; Schindler, 1991).

4. When comparing even prices with "99" odd prices, we found a significant main
effect of price ending, indicating that participants reported that they could buy
significantly fewer even-priced products than they could 99-priced products. The
results indicated that across the four price levels, although reducing the price of a
product is actually a trivial discount of 0.3%, the difference was perceived as a
substantial discount of 14%. When comparing even prices with "88" odd prices,
the main effect of price ending was only marginally significant: the mean number
of products purchasable at the even price was only marginally less than the
number of products purchasable at the "88" price ending. The results indicated
that across the four price levels, although reducing the price of a product is an
actual discount of 3.4%, the difference was perceived as a discount of 11.7%.
Future research may utilize this implicit method of measuring price
perception to better understand the mechanism underlying odd pricing effects.
One study will involve using the method to test the level and image hypothesis. If
the image hypothesis mediates the effect, we should find that odd prices that end
with a "9" will be perceived as less expensive than odd prices that do not. This
may be evidenced by participants’ thinking that they can buy more of a $1.69
product than a $1.68 product. Conversely, if the level hypothesis is correct, we
should find a continuous trend that any odd price will be perceived approximately
equivalently. This may be demonstrated by participants’ thinking that they can
buy about the same number of products priced at $1.69 and $1.68. In a second
study, we plan to measure price perception both implicitly (using the method
discussed herein) and explicitly (by simply asking participants their subjective

5. perception of how expensive a product is). We expect to find that the implicit
measure of price perception mediates the effect of odd pricing on purchase
decisions better than does the explicit measure.
The completed study, as well as the proposed future research, will
therefore collectively provide evidence about the underlying reasons why odd
pricing influences purchasing decisions. The first study clearly demonstrates that
even at a level more basic than purchase decisions, people actually perceive odd
prices as being much lower than even prices. Again, although the odd price was
trivially lower than the even price, the perceived magnitude of that difference was
much greater (as much as 14%). Future research will use this method to
demonstrate why either limit or image effects (or both) account for the effect of
odd pricing on price perception. Finally, additional future research will
demonstrate that implicit perception of price mediates the effect of odd pricing on
purchase decisions.
Although the process of odd pricing is long-standing, research about odd
pricing is still in its infancy. This research will help advance our understanding of
the underlying mechanisms of odd pricing, as well as provide a measurement
technique and theoretical directions for future study.
These days it seems that practically every retail and online store has
bright red “SALE” signs and posters boasting odd discount percentages clogging
their storefront window. 70% off here, 35% off there, and a whole lot of numbers

6. everywhere. These discount incentives appear to be practically begging those
passing by to come in and look around. Yet, beyond the psychological pricing
and pricing strategy implications of these practices, we need to take a step back
and truly take a look at how these incentives affect the customer. You may be
thinking, “Well, they’re sales, so they should be bringing in more customers,” but
as a recent article from The Economist so blankly states in its title, “Something
Doesn’t Add Up,” because research shows that consumers don’t comprehend
the mathematics of a discount. To better understand what’s going on here, let’s
subtract out the confusion, add in some clarity, and multiply the knowledge
dropped.
Typical sales, both online and offline, follow a century’s worth of
discounting and premium pricing strategies to hook in consumers. The idea being
that with a high anchor price being smashed by an impressive discount price
would create a sense of urgency and high perceived value to push a consumer to
purchase. Yet, in a study completed by Akshay Rao of the University of
Minnesota’s Carlson School of Management, the research team found that
consumers are waning on discounts in favor of receiving something extra.
Essentially, consumers would rather “buy one month and get the next free” than
“receive 50% off their first month.”
Keen observers of pricing trends may believe this phenomenon is due to
price fatigue or the rise in consumer intelligence to pricing tricks. After all, we’ve
seen “buy now, this sale won’t last long” for years and know that it really doesn’t

7. go away. Yet, we actually prefer getting more to a discount, because of our
ignorance with math. Rao puts it simply, “most people are useless at fractions.”
The team exposed this incompetence through a series of studies that asked
consumers which deal they would prefer: a 50% increase in quantity or a 33%
discount in price. The secret: they’re both the same offering. Despite their
mathematical equivalence, they found consumers overwhelmingly assume the
quantity increase is a better value. What’s even more interesting is that the
results stayed true even when the discounted product was blatantly a better deal.
II. METHOD OF STUDY
The research relied on the descriptive research in order to gather and
evaluate the data in accordance to the objective of the study. Descriptive
research is concerned with the description of data and characteristic about a
population. Descriptive studies seldom involve experimentation, as they are more
concerned with naturally occurring phenomena than with the observation of
controlled situations. It is a fact finding with adequate interpretation.
The goal is the acquisition of factual, accurate and systematic data that
can be used in average, frequencies and statistical calculations. Descriptive
research answers the questions who, what, when and why and how.
The rational for the use of the study is that the survey design was
regarded as the most appropriate research design to analyze the influence of
odd-pricing to consumers .

8. Sources of Data
Primary Sources. The chosen respondents of this study are the buyers
from SM Sta. Rosa. The random sampling was used to choose the said
respondents. Twenty (20) respondents are chosen to conduct the study.
Secondary Sources. The researcher used various books, periodicals,
articles and other reading materials in the University of Perpetual Help System
Laguna (UPHSL) library regarding some theses and dissertations. Another
source of data used in this study is the internet. The researcher surf the internet
to find other studies regarding the related topics.
Construction of Questionnaire
Constructing a questionnaire involves many discussions about the working
and ordering of the questions, selections and wording of response categories,
formatting and mode of administration of the questionnaires, and introducing and
explaining the survey.
In this research the researchers reads methods of research books in the
library, perused various theses and desertions, books on distribution strategies
as well as research literature on the same topic.

9. Instrumentation and Validation
The researchers used a self-made survey form. Questionnaires from an
important methods of data collection in a number of situations and have been
used extensively in a variety of studies. In validating the researcher review the
questionnaire to determine whether the questionnaire measures what it was
designed to measure. Suggestions, corrections and recommendations were
incorporated with the adviser consent. It underwent editing for language and
grammar before they were given to the respondents of the study.
III. RESULTS
Table 1
Respondents' income bracket
Answer Frequency Percentage
P 10,000 or below 11 55.00
P 15,000 – 20,000 6 30.00
P 30,000 and above 3 15.00
Total 20 100.00
Table 1 shows respondents what was their income bracket. The 11
(55.00=11/50 x 100) out of 20 respondents answered P 10,000 or below, 6
(30.00=6/20x100) answered P 15,000 – 20,000, and the 3 (15.00=3/20x100)
respondents answered P 30,000 and above.

10. Table 2
Respondents who go to malls or supermarket
Answer Frequency Percentage
Always 8 40.00
Once a week 6 30.00
Twice or more in a week 5 25.00
Once a month 1 5.00
Total 20 100.00
Table 2 shows respondents who go to malls or supermarket. The 8
(40.00=8/20x100) of the respondents answered always, 6 (30.00) answered once
a week, 5 (25.00=5/20x100) answered twice or more in a week and 1
(5.00=1/20x100) answered once a month.
Table 3
Respondents who are familiar to odd pricing
Answer Frequency Percentage
Yes 16 80.00
No 4 20.00
Total 20 100
Table 3 respondents who are familiar to odd pricing shows that 16 (80.00
= 16/20 x 100) of the respondents answered Yes and 4 (20.00=4/20 x 100)
answered No.

11. Table 4
Respondents which attract most to buy particular product/services prices
examples
Answer Frequency Percentage
Php 250.50 2 10.00
Php 249.99 9 45.00
Php 249.10 5 25.00
Php 249.75 4 20.00
Total 20 100.00
Table 4 shows respondents which attract most to buy particular
product/services prices examples that 2 (10.00=2/20 x 100) answered Php
250.50, 9 (45.00=9/20 x100) answered Php 249.99, 5 (25.00= 5/20 x 100)
answered Php 249.10 and 4 (20.00 = 4/20 x 100) answered Php 249.75.
Table 5
Respondents who usually see product which uses odd pricing
Answer Frequency Percentage
Yes 16 80.00
No 4 20.00
Total 20 100.00
Table 5 shows respondents who usually see product which uses odd
pricing that 16 (80.00= 16/20 x 100) answered Yes and 4 (20.00= 4/20 x 100)
answered No.

12. Table 6
Respondents who usually see products or services using odd pricing
Answer Frequency Percentage
Supermarket 9 45.00
Public Market 0 0.00
Shopping Malls 11 55.00
Total 20 100.00
Table 6 respondents who usually see products or services using odd
pricing shows that 9 (45.00= 9/20 x 100) answered Supermarket, 11 (55.00=
11/20 x 100) answered Shopping Malls and no one answers Public Market.
Table 7
Respondents who prefer to buy products which uses odd pricing
Answer Frequency Percentage
Yes 13 65.00
No 7 35.00
Total 20 100.00
Table 7 respondents who prefer to buy products/services which uses odd
pricing shows 13 (65.00= 13/20 x 100) answered Yes and 7 (35.00= 7/20 x 100)
answered No.
Table 8
Respondents who said that odd pricing affects their buying habits
Answer Frequency Percentage
Yes 5 25.00
No 15 75.00
Total 20 100.00

13. Table 8 respondents who said that odd pricing affects their buying habits
shows 5 (25.00= 5/20 x 100) answered Yes and 15 (75.00= 15/20 x 100)
answered No.
Table 9
Respondents who think odd pricing help them to easily decide on buying a
product
Answer Frequency Percentage
Yes 10 50.00
No 10 50.00
Total 20 100.00
Table 9 respondents who think odd pricing help them to easily decide on
buying a product shows 10 (50.00= 10/20 x 100) answered Yes and 10 (50.00=
10/20 x 100) answered No.
Table 10
Respondents who think that they can save money when they buy
products/service with odd pricing
Answer Frequency Percentage
Yes 11 55.00
No 9 45.00
Total 20 100.00
Table 10 respondents who think that they can save money when they buy
products with odd pricing shows 11 (55.00= 11/20 x 100) answered Yes and 9
(45.00 = 9/20 x 100) answered No.

14. IV. DISCUSSION
Odd prices also referred to as magic prices, charm prices, psychological
prices, irrational prices, intuitive prices or rule-of-thumb prices are not based on
strict mathematical calculations. Price tags ending in nine and five account for a
majority of the retail prices. Odd pricing is believed to have a considerable impact
on a customer’s mind. The illusion of much cheaper products compels a buying
response. Also it is believed that because consumers are exposed to a
continuous flow of prices; they store only the more valuable first digits of a
number. This is so because the memory processing time is slower in humans.
Odd pricing is also believed to put across the impression that goods are marked
at the lowest possible price because it is a belief that even prices is an outcome
of the retailer rounding up the price to a whole number. Odd prices for the same
reason even give an impression of honesty of a retailer.
Psychological pricing is one cause of price points. For a long time,
marketing people have attempted to explain why odd prices are used. It seemed
to make little difference whether one paid Php29.95 or Php30.00 for an item.
Perhaps one of the most often heard explanations concerns the psychological
impact of odd prices on customers. Odd prices, on the other hand, appear to
represent bargains or savings and therefore encourage buying. There seems to
be some movement toward even pricing; however, odd pricing is still very
common.

15. The psychological pricing theory is based on one or more of the following
hypotheses:
• Judgments of numerical differences are anchored on left-most digits, a
behavioral phenomenon referred to as the left-digit anchoring effect. This
hypothesis suggests that people perceive the difference between 1.99 and 3.00
to be closer to 2.01 than to 1.01 because their judgments are anchored on the
left-most digit.
• Consumers ignore the least significant digits rather than do the proper
rounding. Even though the cents are seen and not totally ignored, they may
subconsciously be partially ignored.
• Fractional prices suggest to consumers that goods are marked at the
lowest possible price.
• When items are listed in a way that is segregated into price bands, price
ending is used to keep an item in a lower band, to be seen by more potential
purchasers.
The theory of psychological pricing is controversial. Some studies show
that buyers, even young children, have a very sophisticated understanding of
true cost and relative value and that, to the limits of the accuracy of the test, they
behave rationally. Other researchers claim that this ignores the non-rational
nature of the phenomenon and that acceptance of the theory requires belief in a

16. subconscious level of thought processes, a belief that economic models tend to
deny or ignore.
Odd pricing is also believed to suggest to consumers that goods are
marked at the lowest possible price. Many retailers believe that the more specific
a statement is, the more inclined people are to believe it. By using odd prices a
retailer may thus convey an image of honesty which would not be achieved by
charging a slightly higher round figure. Other explanations for the effect of odd
pricing include a belief that "circles attract the eye", thereby drawing consumers
to the digit 9, and that customers like to receive change.
The firm belief amongst retailers that odd pricing increases demand for
products is reflected in the widespread practice of odd pricing. There is some
support from three recent studies for the odd pricing assumption that greater than
expected demand occurs at odd price points.
However, there is still very little known about how the process occurs and
whether the effect is the same for different products and at different price levels.
Due to the customer perception of value, numbers do not always
represent its true value in the brains of human beings – a price may appear
expensive, but in another way it can be perceived as really cheap. How is this
possible? It is the psychology behind our everyday mental processes. In fact,
how we react to numbers and how we think about any particular number is
determined by the perceptions generated by our minds. We make different

17. perceptions each time and each time they can potentially make us believe
something is less different (or more) to something’s true value.
This concept of perception of value can be utilized in extensive areas.
Pricing doesn’t just work alone by itself, to apply this price perception strategy, it
must (in most cases) be initiated with support from other factors. There are
several pricing strategies that go with price perception, notably the odd pricing
strategy and its reversed version – prestige pricing; both are regarded as the
most frequently used psychological pricing techniques in the world.
The reason why odd pricing and prestige pricing work is because they
focus on the principle of price perception, in a way that customers think it is
beneficial to them. As brief as possible, odd pricing is when odd numbers (hence
it’s name) are used like Php249.99 rather than a full Php250. What’s the
difference? Sure, 1 cent, but because human beings tend to read numbers from
left to right, this instant mental process that reviews both digits cause us to think
the difference.
This is a simple strategy to encourage customers place orders, raise the
chances of people purchase. This has worked for thousands of years. There are
a couple of explanations to why it works; the first factor is the “left-digit effect”, as
we tend to look at prices from left to right, in most occasions. It is also mainly
because of the psychology behind it, the number 9 will always, and I mean
literally, always appear lower than 10 by a tremendous amount, even though the
real difference is only down by one dollar or one penny if in the case of Php99.99

18. to Php100.00. Ideally, it is because of the whole number point, 9 has only one
unit place, and when moved up by 1, it becomes 10, which means there are two
digits. We tend to look at numbers from left to right, just like how we read (also in
countries where text is read from right to left because the numbers would also be
reversed). Hence, we call it the “left-digit effect” since the majority of the society
reads left to right.
We, human beings, are extremely sensitive with the units of a price. For
example, if a price is Php99.99 whereas another is Php100.00, although the real
difference is only by one penny, but the fact that the number 10 has two digits,
we perceive its value as a lot higher than it really is. Therefore, the consumer
thinks they are receiving great savings by going for the Php99.99. Rounding
upward involves an additional decision compared with storing the first digits.
Furthermore, due to the vast quantity of information available for consumers to
process, the information on price must be stored in a very short interval. The
cheapest way to do so, in memory and attention terms, is by storing the first
digits.
Marketers around the world have profitably used odd pricing to increase
their sales, to be honest it’s impossible if you’ve never seen this classic trick. The
illusion of odd prices being much cheaper than even prices is certainly promoted
in retail advertising by displaying a much smaller type size for cents digits than
for dollar digits, thereby emphasizing the dollar amount of the price. This factor

19. may contribute to the illusion that odd prices are much cheaper than they actually
are.
Alternatively, the odd pricing effect could be the result of marketplace
conditioning of consumers to expect odd price endings. In other words, the sheer
predominance of odd pricing in the marketplace may influence consumers' price
expectations, which in turn makes a positive odd pricing effect on demand a self-
fulfilling outcome.
Factors that may influence the overall effect of odd pricing on demand
include product quality, product type and price level. In relation to price level,
there is some evidence that greater sensitivity to pricing occurred with lower
priced products and that sensitivity to particular price endings varied with price
level.
However, wise customers like you are rare and may not fall for the trick,
although it is seen and not totally ignored, the “discount” is partially still in effect,
more than half of the victims fall for it without realizing. The fact is that there are
people out there who make mentally influenced decisions rather than completely
rational decisions, because thoughts are partially made in an emotional sense.
After all, Odd Pricing has been proven to work, it has been tested on millions of
customers and millions every day, most important of all, this pricing strategy is
supported by psychology and natural human thinking

20. V. REFERENCE LIST
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