A forum for Hawaii's
business community to discuss
current events and issues
» Pricing psychology » Shopping savvy » Beware spyware
BACK TO TOP |
DAVE SWANN / DSWANN@STARBULLETIN.COM Those annoying
odd numbersSetting a price for your products
ultimately comes down to the image
you want to convey
Investigations into the psychology of pricing inevitably lead to a discussion of "odd pricing." Take a look through the advertisements in this paper and see how many prices end in 9. You will no doubt see many prices ending in numbers just below an even dollar amount. This tactic of pricing products at $4.99 or $4.95, rather than $5, is called odd pricing.
As evidence of how widespread this practice has become, even nonprofessionals commonly use it. Take a look at the classified ads in this paper and see how many everyday people use odd pricing to sell their cars or houses.
Numerous market research studies, doing just that -- analyzing prices in newspapers and catalogs -- typically find that odd prices account for 70 percent or more of all advertised prices. In a 2001 survey of 1,200 prices, researchers found that 57 percent ended in 99 cents, and another 11 percent had 98-cent or 97-cent endings. On the other hand, only about 3 percent were whole dollar amounts. A study of U.S. food prices found that 80 percent end in 9 or 5, and a study in Germany showed that 92 percent end in 9.
Interestingly, the evidence about whether odd pricing really works is inconclusive. Research appears more or less equally divided on whether we pay attention to these odd numbers any longer or whether they have any effect on product sales. If this is the case, how did it become so widespread?
One explanation is that the first number in a price is psychologically more important than the last few numbers. It might represent tens or hundreds of dollars, whereas the rightmost numbers represent less than a dollar. Given the difficulty of remembering large numbers, we care more about remembering whether the price starts with a 6 in the hundreds column or a 7 in the hundreds column than we do about the last few pennies. Following this logic, $299.95 should seem to us like a better price than $300. Another explanation is that an odd number gives the impression that the marketer calculated the price to the last penny -- trying to be as competitive as possible. Gas stations carry this to the extreme by advertising gas prices ending in 9/10 of a penny.
Odd pricing became common just after the invention of the cash register. At that time, employee theft was a troublesome problem, and it was thought that requiring clerks to ring up each transaction on this new device would reduce theft since it keeps a record of each transaction. But dishonest employees could simply continue to pocket the money while avoiding ringing up the transaction at all. Odd prices would force the salespeople to issue change, making it difficult to pocket the customer's payment without recording the sale. So Macy's New York began the practice of pricing products a few cents below even dollar amounts, and other large retailers soon followed suit.
Another explanation is that during the 19th century, British goods were thought to be of higher quality than American goods. Conversion of the British pound to American dollars usually resulted in an odd price. Before long, products with an odd price were associated with higher quality.
Ironically, the reverse seems to be true today. Odd pricing is more closely associated with discount products, and research shows that products priced in round dollar amounts carry a perception of higher quality. One study of a drug store chain found that rounding prices up to whole dollar amounts not only failed to affect sales, it had a positive effect on the store's image. It was estimated that the chain had been losing approximately $850,000 a year using odd prices. Many upscale restaurants now price their meals without any decimal place at all -- they simply show the even dollar price. This creates the psychological impression that their customers don't quibble over pennies -- pure snob appeal.
Tips for business
1. If you are trying to appeal to quality-seeking customers, price your product in round numbers, even leaving off the cents entirely.Finally, the answer about why odd pricing is still so prevalent seems to be simply that customers expect to see it. One study even concluded that consumers are so accustomed to odd prices that they viewed round number prices as a mistake. It remains an interesting question why a practice so widely used by marketers has so little evidence of effectiveness behind it.2. If you want to project a value image to bargain shoppers, use odd pricing -- end your price with a 9 or a 5.
3. Price your product as close as possible to a price threshold. Many products have a pricing "dead zone" leading up to a price threshold. For example, sales of a product may not drop off as the price rises from $64 to $65 on up to $69; however, they do drop off as the price goes over the threshold of $70. The implication is that if you have a product priced at $66, you may be able to price it at $68 or $69 with little drop-off in sales and substantial extra profit.
Ted Haggblom is a marketing professor at Hawaii Pacific University. He is president of PriceLogic Corp. and a director of the Pacific Pricing Institute. He can be reached at 544-0831 or thaggblom@hpu.edu
BACK TO TOP |
JAN PASCHAL/ JANSSHOPSAVVY@AOL.COM
A set of Heidi & Co.'s scrub, the lotion and the body wash, packaged in a yellow chiffon drawstring bag, sells for $45.
Pina colada, without
the calories
NEW YORK >> Pina colada is my favorite vice.
Now I've found a way to enjoy it without taking in a single calorie.
The secret? Heidi's Tropical Scrub, Heidi's Moisture Magnet Body Wash and Heidi's Wonder Whip Body Lotion. I discovered these pina colada-scented skin care products while browsing one bitterly cold afternoon at the Fifth Avenue stronghold of Takashimaya, the 173-year-old Japanese retailer.
"It's a wellness product," said Heidi Zwicky, owner of Heidi & Co. and the former manicurist who dreamed up these yummy concoctions for the body.
Wellness, indeed. I had gone shopping to celebrate good news: My doctor had just told me that a skin graft to repair a defect from cancer surgery was a success.
After one whiff of the rich Wonder Whip lotion, I bought a bottle as a "thank God I'm well" gift for myself. (Price: $22 at Takashimaya; $16 online from Heidi & Co. at: www.heidinails. com or call 1-800-943-4349)
A bamboo lantern and CDs of Hawaiian music accented Heidi's display at Takashimaya, which looked like a spa with a touch of Zen.
Two CD titles caught my eye -- "Lullaby" by Kohala, an acoustic guitar trio, and "Island Images" by Ensemble Pacific, a group whose sound includes guitar and flute plus ethnic percussion instruments like kalimba and log drum. (Price: $18 each from Palm Records on Big Island. To check their catalog, call toll free 1-888-882-7256 or online: www.palmrecords. com)
"We call it play and sell," said Jody Brotman, who owns Palm Records with her brother, Charles Michael Brotman, a Kohala guitarist and CD producer. "It's a formula that works really well for us."
Palm Records, in business since 1998, has "quite a few spa accounts and some specialty stores like Takashimaya," she added. "They like to create an environment by playing the music. It's an impulse purchase."
Their music "seems to strike a chord with the listener in Japan," she said, noting that Toshiba EMI distributes Palm Records titles there.
A Hong Kong hit
Men seem to like the pina colada scrub almost as much as women do.
COURTESY PHOTO
"To care for your skin, consider the three layers: internal, external and the super external. Heidi's products (like her hand cream) act like a glove, protecting your hands, even staying on after you wash your hands." --Gordon Chiu, Skin care consultant
Gordon Chiu, a New York skin care consultant and Mount Sinai School of Medicine student who also hosts a weekly wellness show on Radio Television Hong Kong, gave Heidi's Tropical Scrub and Heidi's Nail Solution his "seal of excellence." His 1.8 million radio fans noticed and demand for the products took off in Hong Kong.
"Her scrub, after exfoliating, is very moisturizing," said Chiu, a biochemist who has worked for Kanebo, Shiseido and Estee Lauder. "There are a lot of scrubs out there. Many of those products are basically a salt scrub."
Some scrubs can cause very dry skin to crack. Heidi's Tropical Scrub avoids salt, Chiu said. Instead, its exfoliants and moisturizers include willow bark beads, alpha hydroxy acids and jojoba beads in an aloe vera base.
"To care for your skin, consider the three layers: internal, external and the super external. Heidi's products (like her hand cream) act like a glove, protecting your hands, even staying on after you wash your hands."
Heidi's Hand Creme Deluxe is enriched with shea butter and absorbs quickly.
Chiu likes Heidi's Nail Solution because of "the thought process behind it: If you want the nail to improve, to heal, you don't want to put a hard lacquer on top. There's not a hard lacquer product in Heidi's entire line."
Reformed nail biter
If Zwicky had not been a nail biter, she might not have been driven to invent a better cuticle cream."People really want natural nails," said Zwicky, who worked as a licensed manicurist at the Spa at the Crescent, a five-star hotel spa in Dallas that banned acrylic nails.
"Of course, I'd been a nail biter on and off for years. I went on a search for a product that was really good. I wondered: Is a man making these products? I bet people who are making this stuff don't have this problem."
She bought a cosmetic dictionary. Soon, she was poring over nail product packages. Many products had the same ingredients. Only the packaging differed.
"I thought: I bet I can develop this myself. I knew there were private labs," said Zwicky, whose parents built their Wisconsin cheese business into a gourmet snack and food distributor. "Two years and 11 formulas later, after rigorous testing, I was holding Heidi's Nail Solution in my hands."
That was in 1996. Her winning formula: Cottonseed oil, a plant-based protein; fixed with emollients, honeybee wax, soybean oil and lanolin.
The nail cream, at $18 for a 0.75-ounce jar, isn't cheap.
"My philosophy: For the price of a manicure, you can have a whole new set of nails."
Customers with psoriasis and eczema have written or called to tell her that her Hand Creme Deluxe "works better than their prescriptions," she said.
She put up her car as collateral to get a bank loan to start her company from the kitchen table of her condo in Irving, Texas, a Dallas suburb. It now brings in about $250,000 a year in sales.
Germ fighter
In the midst of cold and flu season, Heidi & Co. is rolling out a new product: GermWise Sanitizer Spray. (Price: $7.50 for a 4-ounce bottle) Its key ingredient is a diluted solution of stabilized chlorine dioxide.She has three patents pending on the GermWise formula, which she says is mild enough to use on the face, hands and elsewhere. Product testing shows the spray can kill fungus and bacteria, including candida albicans and staphylococcus.
Chiu, whose resume includes HIV drug research for Pfizer and a stint at Merck & Co., believes GermWise Sanitizer Spray is the product that could catapult Heidi & Co. from the ranks of the small fry to the big leagues.
"That product is a light saber," Chiu said. "It's somewhere between the discovery of Clorox and Listerine. The market for a cleanser like this; it's a billion-dollar market."
Jan Paschal is a New York-based shopping columnist. She can be reached via email at: jansshopsavvy@aol.com
BACK TO TOP |
Take steps to fight
intrusive spyware
Adware (aka spyware) is one of the most insidious little devils out there on the Internet.
Although spyware doesn't garner the kind publicity that viruses get, it can wreak substantial havoc.
A spyware assault starts out inauspiciously by giving the impression that your PC is always in low gear. Your computer seems to gag, sputter and crash more than normal. The most noticeable symptom, along with sluggishness, is a high incidence of pop-up ads.
Think you may have spyware? Here are some ways it manifests itself:
>> It can replace your home page and not allow you to change it back.If what I'm describing has become a part of your computing experience, odds are your PC has become home to one or more varieties of spyware -- a pest that combines some of the worst features of spam and viruses.>> It can add a new set of Web pages to your "Favorites" list. Don't be shocked if some of them are "adult" Web sites.
>> It can add an extra line of text to your Web browser, pitching a variety of items, including X-rated Web sites.
>> It can launch a never-ending series of pop-up ads that appear as quickly as you close them.
It's similar to a virus in that it can bog down your system, change settings without asking your permission, monitor your every key click and transmit your personal information to people who have no business knowing it.
As with spam, spyware gobbles up bandwidth and pitches you junk products.
Perhaps the scariest thing about spyware is that it can report on your every move across the Internet to a stranger.
Why would anyone care where you go on the Net? Having this type of data allows advertisers to target ads or spam with products specifically aimed at your surfing habits.
How do you avoid this stuff? Stay away from offers to run free programs. For example, a popular ploy is an offer to download an application that places the outside temperature next to your computer's digital clock.
So, once infested, how do you get rid of spyware?
If you're a hands-on user, there are a couple of sites I can suggest. Check out PestPatrol.com and run a (free) scan of your system. They will list any spyware/adware found, but because it's an evaluation version you can't remove the offending code. Price is $40 per year for the home user edition. I'd also visit PCPitStop.com, which is another good anti-spyware scanner. It will identify spyware and describe in detail how to clean up your PC.
"Ad-aware" is free and is available at www.LavaSoftUSA.com. It's easy to run and thorough. It comes in the "standard" edition, which is free, and more sophisticated Professional and Plus versions that will automatically scan for malevolent code. Price for the Plus Edition is $27. The Professional version ($40) provides more "flexibility," according to the Web site.
Another popular free software is "Spybot-Search & Destroy," at safer-networking.org . This program works quickly, identifies a number of problems and allows you to easily remove them. It also explains what the offending programs were and "immunizes" you from further exploitation from these particular pests. Lavasoft does not charge a fee, but asks for a donation.
Kiman Wong, general manager of Internet services at Oceanic Time Warner Cable, is an engineer by training and a full-time computer geek by profession. Questions or comments should be addressed to kiman.wong@oceanic.com.
To participate in the Think Inc. discussion, e-mail your comments to business@starbulletin.com; fax them to 529-4750; or mail them to Think Inc., Honolulu Star-Bulletin, 7 Waterfront Plaza, Suite 210, 500 Ala Moana, Honolulu, Hawaii 96813. Anonymous submissions will be discarded.
