Adapted from AdPrin.com

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 3

The plan might increase very short-term profit, but reduce long-term profits.

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

Should the Bose Wave Radio have a round price?

See the next slide for the answer.

Adapted from AdPrin.com 6

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.

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.