Perceived Value

“For many years researchers have investigated customers’ response to product pricing,” notes in their “Market Pricing: Psychological Method” article. “Some of the results point to several interesting psychological effects price may have on customers’ buying behavior and on their perception of individual products.” 1

So-called “odd-even” pricing has become commonplace as a result “based on the belief that certain prices or price ranges are more appealing to buyers,” writes the website.2 explains:

“Odd-even” pricing relates to whole number pricing where customers may perceive a significant difference in product price when pricing is slightly below a whole number value. For example, a product priced at (US) $299.95 may be perceived as offering more value than a product priced at $300.00. This effect can also be used to influence potential customers who receive product information from others. Many times a buyer will pass along the price as being lower than it is either because they recall it being lower than the even number or they want to impress others with their success in obtaining a good value. For instance, in our example a buyer who pays $299.95 may tell a friend they paid “a little more than $200” for the product when in fact it was much closer to $300.3

“Originally, this practice was meant to prevent pilfering of cash by forcing a cashier to open the cash-register (to pay change to the customer) and thus register the transaction,” notes in their explanation of odd-even pricing.4

“Another psychological effect, called prestige pricing, points to a strong correlation between perceived product quality and price,” continues:

The higher the price the more likely customers are to perceive it has being higher quality compared to a lower priced product. (Although there is point at which customers will begin to question the value of the product if the price is too high.) In fact, the less a customer knows about a product the more likely they are to judge the product as being of higher quality based on only knowing the price. Prestige pricing can also work with odd-even pricing as marketers, looking to present an image of high quality, may choose to price products at even levels (e.g., $10 rather than $9.99).5

“Price lining or product line pricing is [another] method that primarily uses price to create the separation between the different models,” further explains in their “Market Pricing: Price Lining Method” article:

With this approach, even if customers possess little knowledge about a set of products, customers may perceive they are different based on price alone. The key is whether the prices for all products in the group are perceived as representing distinct price points (i.e., enough separation between each). For instance, a marketer may sell a base model, an upgraded model and a deluxe model each at a different price. If the differences in features for each model is not readily apparent to a customer, such as differences that are inside the product and not easily viewed (e.g., difference between laptop computers), then price lining will help the customer recognize that differences do exist as long as the prices are noticeably different.6

“Just because something is cheap doesn’t mean it’s a good deal,” writes Roberto A. Ferdman for The Washington Post:

Several of America’s largest food manufacturers have been shifting their retail strategy, selling less of their packaged foods in traditional grocery stores and more of those foods in dollar and discount stores, according to a recent Reuters story.…

In order to offer the facade of affordability, manufacturers like Kraft are selling food in smaller packages. These granola bars, sauces, cereals, and prepared meals look like they cost less, but actually are far more expensive on a per ounce basis, according to Reuters.…

In other words, people go to Dollar General to save, because they have to. And according to this Reuters story, they’re buying food that looks cheaper but is ultimately costing them more.7

Backyard Brains - Neuroscience for Everyone!
Neuroscience for Everyone!

“Bigger is better” has long been a guide to drive even the smallest decisions. Size matters they say, and Katherine I. DiSantis et al studied “Plate Size and Children’s Appetite: Effects of Larger Dishware on Self-Served Portions and Intake” in the Journal of the American Academy of Pediatrics. They concluded that:

Children served themselves more with larger plates and bowls and consumed nearly 50% of the calories that they served. This provides new evidence that children’s self-served portion sizes are influenced by size-related facets of their eating environments, which, in turn, may influence children’s energy intake.8

The concept of “Bigger, Better, Faster, More!” – generally considered sexual in origin – pervades our music,9 advertising,10 and even children’s programming.11 Political speaking points, too, often involve issues relating to size, especially when money is concerned.

“A group of four management professors – Avi Goldfarb, Ryan McDevitt, Sampsa Samila, and Brian Silverman,” reports Joshua Gans for the Slate website, “examined situations in which a shift in retail practice reduced human interaction and observed consequent changes in purchasing behavior.”

The first case the authors document was a late 1980s change in Swedish liquor retailing that led to stores being moved from an “ask a clerk to retrieve a bottle” model to a “self-service” format. It turned out that, not only did removing a layer of human interaction spike sales (by 20 percent) but it also led to a shift in those sales toward a large number of difficult-to-pronounce drinks.…

Two decades later, when an undisclosed pizza chain…offered a new way of ordering online, embarrassment was more clearly in play. Order online and you remove the need to talk to a human over the phone or at a counter.… Web users made different types of orders.… For the pizza chain, avoidance of embarrassment led to 21.4 percent more profits per customer.12

The researchers’ “results build on the recent work in economics that examines the effect of emotions and social cues on behavior (Card, D. & Dahl, G. B. (2011), ‘Family violence and football: The effect of unexpected emotional cues on violent behavior’, Quarterly Journal of Economics 126, 103-143; Ifcher, J. & Zarghamee, H. (2011), ‘Happiness and time preference: The effect of positive affect in a random-assignment experiment’, American Economic Review 101, 3109-3129; Li, H., Rosenzweig, M. & Zhang, J. (2010), ‘Altruism, favoritism, and guilt in the allocation of family resources: Sophie’s choice in Mao’s mass send-down movement’, Journal of Political Economy 118(1), 1-38; Akerlof, G. A. & Kranton, R. E. (2000), ‘Economics and identity’, Quarterly Journal of Economics 115(3), 715-753; Rabin, M. (1993), ‘Incorporating fairness into game theory and economics’, American Economic Review Papers and Proceedings 83(5), 1281-1302; Daughety, A. & Reinganum, J. (2010), ‘Public goods, social pressure, and the choice between privacy and publicity’, American Economic Journal: Microeconomics 2(2), 191-221; DellaVigna, S., List, J. A. & Malmendier, U. (2012), ‘Testing for altruism and social pressure in charitable giving’, Quarterly Journal of Economics 127(1), 1-56.).” 13


1 “Market Pricing: Psychological Method,”, at (retrieved: 14 May 2011).

2 “odd even pricing,”, at (retrieved: 14 May 2011).

3 “Psychological Method,”

4 “odd even pricing,”

5 “Psychological Method,”

6 “Market Pricing: Price Lining Method,, at (retrieved: 15 May 2011).

7 Roberto A. Ferdman, “How big food brands are boosting profits by targeting the poor,” The Washington Post, 7 February 2015, at (retrieved: 7 February 2015).

8 Katherine I. DiSantis, PhD, Leann L. Birch, PhD, Adam Davey, PhD, Elena L. Serrano, PhD, Jun Zhang, PhD, Yasmeen Bruton, BS, and Jennifer O. Fisher, PhD, “Plate Size and Children’s Appetite: Effects of Larger Dishware on Self-Served Portions and Intake,” Journal of the American Academy of Pediatrics, 7 January 2013, at (retrieved: 18 November 2013).

9 “Bigger, Better, Faster, More!” 4 Non Blondes,, at,_Better,_Faster,_More! (retrieved: 18 November 2013).

10 “AT&T Wireless Commercial – Bigger is Better December 2012,” Bruce Allen Clark video at, (retrieved: 18 November 2013). (Show video)

11 Disney’s “Sofia the First – Bigger is Better,” Musing Maple video at, (retrieved: 18 November 2013). (Show video)

12 Joshua Gans, “The Double Bacon Extra Cheese Problem; Consumers are embarrassed by their predilections. Eliminate embarrassment, increase sales,”, 11 December 2013, at (retrieved: 11 December 2013).

13 Avi Goldfarb, Ryan C. McDevitt, Sampsa Samila, and Brian Silverman, “The Effect of Social Interaction on Economic Transactions: An Embarrassment of Niches?” Duke University, March 2013, at (retrieved: 12 December 2013).

Related video

“Why Engagement Rings Are a Scam,” CollegeHumor video at, (retrieved: 1 July 2014). (Show video)

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