(WZZM) - According to Kelly Cowart, Assistant Marketing Professor at Grand Valley State University, psychological pricing has been going on for nearly 100 years.
"Psychological pricing has to do with 'perception of value'. It's something that's pretty common and it's done globally not just here in America," said Cowart.
Psycholocigal pricing is most often associated with prices ending in 95 or 99 cents, to give the impression the item is cheaper than it really is. "It's based on the concept of 'left price anchoring'. We read from left to right, so whatever number we see on the left, we tend to hold onto that number regardless of what's on the right. So if I see $2.99 and $3.00, I hone in on that 2 and 3, even though it's a penny difference," says Cowart.
She adds, "60% to 70% of prices that we see end in an odd number, usually a 9. As far as whole numbers, we're looking at about 7%, so as an economy, we've moved toward a value consciousness."
It certainly appears to work, according to a test we tried on six Grand Valley State University students. We gave them five questions, to better disguise the one question, asking the difference between $5.00 and $3.99. Five of the six students we tested, had some trouble coming up with the exact price difference between the two figures. After pausing a few seconds, most told us they originally thought the difference was $2.01. One of the six had no trouble at all with the question.
If it didn't work, you can bet most retailers wouldn't still be using it. We spoke with three prominent businesses in West Michigan and all refused to talk publicly about their marketing strategy and why they price their items ending with in 99 cents.
Another part of psychological pricing is 'whole number pricing' says Cowart.
"The flip side of that is prestige pricing,where if I want to convey to you quality, I usually give you around number. 'This is a quality product, you want to pay full price for this.' We've become socialized here in America to know that that whole number means quality."
Cowart says the best way to avoid falling for perceptive pricing, stay informed and stick to a list.