The Left Digit Effect in Pricing Strategy
The Left Digit Effect in Pricing Strategy: $19.99 Because $20 is Too Much!
Have you ever come across price tags that have 9 endings? Have you ever bought those merchandise with 9 endings thinking that was the best deal and ended up with an enormous bill? Do you notice that the 9 endings are usually printed in a much smaller size than the digits on the left? This is a result of a psychological concept called “The Left Digit Effect” in which people tend to pay more attention to the left-most digits than the ones on the right. The idea has been widely used for decades for its great impact on consumers’ shopping behavior. Nine endings can easily be seen everywhere: stationeries of $1.99, $4.99 in bookstores, cars of $2,999, $5,999 in a dealership, real estates of $199,999, $299,999 on the market. It is interesting how such a small change can make a price tag seem significantly lower than another one of just one cent or one dollar higher, as well as greatly affect consumers’ decision. Even the smartest shoppers can fall for this little trick. For a lot of times I found myself wondering why I bought goods of the best prices but ended up with a large bill. Later I realized that I had fallen victim of the usage of the left digit effect in pricing strategy. However, it is fascinating to learn about how the application of such a simple effect turns out to have a great impact on people’s mind without their even being aware of it. The left digit effect can be simply defined as people’s paying disproportionate attention to the digits on the left compare to the ones on the right. This results from human’s instinct of reading from left to right. Another possible reason is that the encoding processes in human’s mind start before people even finish reading all of the digits. They tend to think fast in order to move on with other things, so they underestimate the importance of the right digits and make the digits on the left the magnitude. Taking advantage of that,
Have you ever come across price tags that have 9 endings? Have you ever bought those merchandise with 9 endings thinking that was the best deal and ended up with an enormous bill? Do you notice that the 9 endings are usually printed in a much smaller size than the digits on the left? This is a result of a psychological concept called “The Left Digit Effect” in which people tend to pay more attention to the left-most digits than the ones on the right. The idea has been widely used for decades for its great impact on consumers’ shopping behavior. Nine endings can easily be seen everywhere: stationeries of $1.99, $4.99 in bookstores, cars of $2,999, $5,999 in a dealership, real estates of $199,999, $299,999 on the market. It is interesting how such a small change can make a price tag seem significantly lower than another one of just one cent or one dollar higher, as well as greatly affect consumers’ decision. Even the smartest shoppers can fall for this little trick. For a lot of times I found myself wondering why I bought goods of the best prices but ended up with a large bill. Later I realized that I had fallen victim of the usage of the left digit effect in pricing strategy. However, it is fascinating to learn about how the application of such a simple effect turns out to have a great impact on people’s mind without their even being aware of it. The left digit effect can be simply defined as people’s paying disproportionate attention to the digits on the left compare to the ones on the right. This results from human’s instinct of reading from left to right. Another possible reason is that the encoding processes in human’s mind start before people even finish reading all of the digits. They tend to think fast in order to move on with other things, so they underestimate the importance of the right digits and make the digits on the left the magnitude. Taking advantage of that,
References: Off-by-one Pricing Psychology (October 18th,2010). The Express Tribune. Weiner, D. (October, 2012). The effects of numeracy and brand reference on the left digit effect. Thomas, M. & Morwitz, V. (n.d). Penny wise and pound foolish: the left digit effect in price cognition. Brewer, N. T. & Chapman, G. B. (2002). The fragile basic anchoring effect. Journal of Behavioral Decision Making (15)