Adapted from AdPrin.com

A new pricing policy

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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

The Plan: Use round prices (1.4.2)

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 used odd prices on 99% of its items while Nieman Marcus used it on 16%. For experimental evidence, see:(Schindler and Wiman 1989

3

Evidence on round prices

Evidence on the round vs. odd prices was obtained from a number of laboratory and field experiments.A summary is provided on pages 44-45 of Persuasive Advertising.

Adapted from AdPrin.com 6

Should the Bose Wave Radio have a round price?

Click this slide for the evidence-based answer.

Yes, Bose is a high-quality product.

Adapted from AdPrin.com

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 Advertising p 44). If you would like to emphasize quality, use round prices.