Odd pricing is a pricing method aimed at maximizing profit by making micro-adjustments in pricing structure, relying on the assumption that consumers are calculation-averse and will only read the first digits of a price. The odd pricing strategy relies on the fact that consumers highly value their time when evaluating prices. There is an increasing time cost associated with examining each additional digit within any given number, which means that when examining a price, the first digits carry far more weight than the last ones.
Empirical evidence demonstrates that a better purchasing signal is achieved with “.99” prices. Products whose prices end in “.99” are often perceived as promotional or cheap items. If, however, the estimated product quality has an impact on the demand, then a perceived decrease in quality associated with “.99” prices results in lower demand and therefore lower profits.
The odd pricing method focuses on capturing demand for a product by creating micro adjustments of the price in a way that alters the psychological perception of the consumer to their benefit, creating a trap we all fall into in our daily lives.
Learn more in the entry Odd pricing of the Lokad knowledgebase.