Buyers should pay more attention to prices

Feb 24, 2009 10:33 GMT  ·  By

A new study, published in the latest issue of the Journal of Consumer Research, shows that an occurrence known by marketers as the “left-digit effect” drastically influences the choices that people make while buying various items. Simple experiments have proven that too little attention is paid to the digit on the right hand side of a price tag. In actual stores, this is encouraged, as producers and managers have the final two numbers of the price printed with much smaller fonts than the first one or two.

“Shoppers pay a disproportionate amount of attention to the leftmost digits in prices and these leftmost digits impact whether a product's price is perceived to be relatively affordable or expensive,” the new paper authored by researcher Kenneth C. Manning from the Colorado State University, and investigator David E. Sprott, based at the Washington State University, says.

In the first series of tests, the scientists priced two pens at $2 and $4, respectively, and presented the choices to the test subjects. In the first scenario, one pen was sold for $2, and the other for $3.99. Some 44 percent of participants selected the most expensive item. But when, in the second one, one pen was sold for $1.99, and the other for $4, only 18 percent chose the second type. This further emphasizes the fact that individuals don't think that the last digits are important, when in fact they are crucial.

“The larger perceived price difference between the pens when they are priced at $1.99 and $4.00 led people to focus on how much they were spending, and ultimately resulted in a strong tendency to select the cheaper alternative,” the paper reads.

In a second set of experiments, the scientists used round prices, such as $30 and $40, as well as their derived counterparts, $29.99 and $39.99, respectively. “When we showed people these sets of prices, most perceived the two round prices to be more similar to one another than the two just-below prices. Based on the perceived price differences, we predicted that people would focus less on how much they were spending when presented with round prices, and as a result, a relatively large percentage of people would opt for the $40.00 option,” the team explains.

“Consumers should be aware of the subconscious tendency to focus on the leftmost digits of prices and how this tendency might bias their decision-making,” the study concludes.