Authors: Wagner, Ralf; Beinke, Kai-Stefan

Source: Journal of Product and Brand Management, Volume 15, Number 5, 2006 , pp. 341-351(11)

Publisher: Emerald Group Publishing Limited

Abstract:

<B>Purpose</B> - The purpose of this paper is to introduce a new approach for the identification of price thresholds, which enables learning true thresholds from previous buying decisions recorded in POS scanner data. <B>Design/methodology/approach</B> - The methodology presented herein combines spline regression with generalized cross-validation. Classical Chi-square testing confirms the separation of regimes of the price response function by this methodology. Five propositions concerning the consumers' response to odd pricing in a Western-type market are evaluated. <B>Findings</B> - Despite the widespread retail practice odd prices are unlikely to flag the actual threshold in consumer response. The term odd price refers to prices with a non-zero ending in the cent digit, e.g. .95, .98 or .99, which are commonly used in Western-type markets. Moreover, the simple odd price effects are distinguished from odd-ending prices with the first number left of the decimal point set to an odd number. The results show that even these prices not always flag a threshold in consumer response. <B>Research limitations/implications</B> - The discussion of the odd-price effect is confused by conflicting empirical results and related interpretations of the underlying mechanisms. In contrast to many previous investigations - which are restricted to the consideration of very few price endings - this study covers all reasonable prices. Statistically significant odd-price effects are found for some brands, but not for all within the same category. <B>Practical implications</B> - One must argue for checking the thresholds for each brand individually rather than generalizing by applying misleading rules of thumb. <B>Originality/value</B> - The paper provides researchers as well as practitioners with a methodology to evaluate price thresholds and outlines the shortcoming of contemporary retailers pricing practices in a detailed manner.

Keywords: Consumer behaviour; Price positioning; Pricing policy

Document Type: Research article

DOI: http://dx.doi.org/10.1108/10610420610685730

Publication date: 2006-08-01

Related content

• In this: publication
• By this: publisher
• In this Subject: Business
• By this author: Wagner, Ralf ;  Beinke, Kai-Stefan

Website © Publishing Technology. Article copyright remains with the publisher, society or author(s) as specified within the article.

• Terms and conditions
• Privacy policy
• Information for advertisers