# Avoiding the Power of Psychological Pricing

A vast majority of prices you’ll see at your local retailer end in odd numbers – usually nine. According to a 1997 study, approximately 60% of prices in advertising material ended in the digit 9, 30% ended in the digit 5. Why do retailers do this? Simply put, it works.

Since the 1920s, a majority of retailers have found that ending a price with a nine – or other non-round number indicates to the consumer that this purchase is a great value seemingly saying, “It’s priced as low as possible!” In your analytical mind while reading this you may be saying to yourself, “no way! I’m smart enough to know that filling up the car at \$3.69 and 9/10ths is the same as paying \$3.70.” – but most consumer spending is anything but rational and analytical. We read numbers from left to right and in our impulsive, emotional brain, \$9.99 feels a world’s difference from \$10!

There are other reasons for the odd pricing theory.

Price banding: When comparison shopping, a house listed at \$199,999 will be in a different price bracket than one at \$200,000. A buyer shopping for a home may have an upper limit which \$199,999 will fit within. The \$200,000 home won’t show up in their search.

The left-digit anchoring effect is a well-documented phenomena when faced with having to do math. Quick! What’s the difference between \$3.99 and \$5.00. Your non-logical brain will often mistakenly think \$2.01 rather than \$1.01. Again, your brain is on high alert while reading this article – but while in the store making impulse purchases, it gets a little fuzzy when our judgments are anchored on that left-most digit.

Why is it so important to sway impulse purchases? In the grocery store, for example, as many as 70% of all purchases are unplanned. Clever pricing and marketing can mean big differences by the time you hit the register. Big differences for you and I mean big differences in profit for the retailer.

While there are numerous studies which support the “odd pricing” theory, the biggest evidence that it works is the fact that retailers have not strayed from the formula in nearly 100 years.

There are a couple standouts. JC Penney has recently undertaken a campaign to convince shoppers that they will get “Fair and Square Every Day” pricing by rounding their prices. Nordstrom uses even prices as an indication of their quality and sophistication. A bold, even, price states their confidence that these are the right prices you should pay for their products. You won’t see a fine restaurant sell steak at \$31.99. A price of \$32 seems far more sophisticated.

Regarding pricing, there is one other important thing to watch out for – particularly at the grocery store: Make sure you are clear on sale pricing rules for your store when a sale is offered on multiples. Why do grocery stores sell yogurt as 10 for \$5, for example? It works… very well. Sales have shown to skyrocket when a price is tied to a multiple. Most shoppers know that buying the full quantity is seldom necessary – unless stated otherwise. When a price says 3 for \$5, you will likely be able to buy the product individually for \$1.67. While I normally advocate stocking up when you find a great deal, if you won’t use the 2nd and 3rd items before the expiration date, buying multiples is no good deal at all. If you are not sure about the pricing policy at your store, please ask! You don’t want to get caught paying full retail if your grocery store does not allow you to get the sale price on a single purchase which is part of a “˜mutiples sale.’

Finally, beware of the sneakiest psychological pricing of all: smaller product sizes. For years, we’ve had to update our database at SavingsAngel with new product sizes and quantities offered by manufacturers designed to give away less product for the same dollar amount. This can be frustrating for you and I – and this is why I advocate becoming an enlightened shopper. The days of impulsive, need-based shopping needs to end for you and your family if you don’t want to part with hundreds of extra dollars each month.

The best couponers save hundreds of dollars every month at the grocery store. However, couponers can end up living very extreme lifestyles to get those savings. For over five years, SavingsAngel.com has equalized the playing field ““ giving extreme savings to busy families who don’t have the time or ability to be an full-time couponer. Each week, SavingsAngel.com’s team of more than 70 angels combines over 2,000 products on sale at local grocery and drug stores with an enormous database of over 2,000 different manufacturer coupons. These combinations result in our members getting access to over 300 products each week for 50% off or better. Simply log in, choose the deals you want, print or clip only the coupons you need, and save hundreds of dollars a month at regional and national stores. Our angels will personally work with you to craft a plan that will help you buy healthier food at lower prices ““ helping you keep \$200 to \$400 in savings each month.

Josh Elledge is the Chief Executive “Angel” of SavingsAngel, Inc. ““ launched from his Holland, Michigan home in January 2007. A husband and father of three, he now appears on television, in many newspapers, and a number of radio stations across the country each week teaching families how to cut their grocery bill in half using the Internet. Elledge created the technology found on SavingsAngel.com through the need to save his own family’s money. Successfully able to cut his own family’s grocery bill from \$600 a month to less than \$300 a month, his message has reached hundreds of thousands of families. SavingsAngel.com is now growing rapidly throughout the country. You can watch a short video at SavingsAngel.com that will explain more information about how to cut your own grocery bill in half with the help of SavingsAngel.com.