New Era University

College of Business Administration

No. 9 Central Ave., New Era, Quezon City

THE PERCEPTION OF THIRD YEAR MARKETING MANAGEMENT

STUDENTS OF NEW ERA UNIVERSITY IN ODD PRICING STRATEGY
USE IN BENCH CLOTHING
Submitted in Partial Fulfillment
of the Subject Marketing Research (MKM 11-3)

Submitted by:
Leader:

Cruz, Vincent Joshua S.

Members:

Castillo, Breezel DS.

Ciriaco, Jhal-Yhen E.
Dela Fuente, Rose Ann J.
Goloviogo, John Paul V.

July 2015

CHAPTER 1
THE PROBLEM AND ITS BACKGROUND
This chapter presents the background of the study, statement of the problem,
significance of the study, definition of terms and scope and limitations.

INTRODUCTION
A price was, is and will be one of the most important criteria which influence
consumers' purchasing decisions. This is common to different countries, because the
market economy cannot exist without prices. A profit is the main goal of pricing for a
number of companies. However, pricing is an important activity when the companies
going to win a bigger part of a market react to actions of competitors, in survival or
image development. Obviously, companies expect a corresponding consumer's reaction
to their pricing. Unfortunately, sometimes consumers react differently to a company's
pricing activities. Consumers perceive a price subjectively, depending on their
experience with a certain product. In some cases they compare the current price with
the prices in the past or with the prices which they remember or even imagine. Finally,
the perception of a price depends on the purpose of purchasing or importance of a
product in a certain situation. Due to a variety of consumers companies developed
different strategies of pricing (Snieskien 2009).
One of such strategies is an odd price. Odd prices are sometimes referred to as
psychological prices (Schindler, Warren 1988), magic prices, charm prices, irrational
prices, intuitive prices or rule-of-thumb prices (Folkertsma 2002; Gendall et al. 1997), as
well as odd prices or prices which end with number 9 (Guido, Peluso 2004). Wagner
and Beinke (2006) separate two types of odd prices--odd-odd prices (29.99 or 29.95)
because they are just below the line 30.00 and simple odd prices as 30.99 or 30.95.
However, their general characteristic is that they are set just below the nearest round
figure for example, 9.99 instead of 10.00 (Gendall et al. 1997).
Evidence of odd pricing can be traced back more than 100 years (Schindler,

Wiman 1989). One of the explanations for the introduction of odd pricing is that it arose
as a measure to help combat theft by employees (Hogl 1988). Odd prices were adopted
to force salespeople to issue change and thereby make it difficult for them to pocket the
customer's payment without recording a sale (Gendall et al. 1997). Nowadays usage of
odd prices is based on one of the underlying assumptions which encourages retailers to
apply those prices so that consumers may consider odd prices as lower and these
prices can have positive effects on sales (Ngobo et al. 2010).
Prior researches reported an intense practice of this method, with the percentage
of prices ending in the digit 9 ranging between 52% and 80% (Mace 2012). Suri et.al.
(2004) point that odd prices dominate in various areas of trade, across different
products. However, Suri, Anderson and Kotlov (2004) mentioned that the studies related
to odd prices were done mainly in the USA or other developed countries. Schindler
(2009) noticed intensive use of odd price in the USA and other English-speaking
countries. Wagner and Beinke (2006) added that even though odd prices are noticeable
in different countries, they are more popular in western countries. Nguyen et al. (2007)
agree that perception of odd prices could be not the same in different markets. They
noticed that odd prices create an effect of cheapness more often in low context
countries (for example, western cultures) than high context countries.
One common hypothesis is that consumers will tend to pay attention to only the
peso part of a price and drop off the cents part. Thus, if consumers perceive a price
such as 99.99 as 100, then by pricing a 100 item at 99.99, the retailer will lower the
perceived price by one dollar at the cost of only one penny. Lambert (1975) tested this
hypothesis by asking respondents to give an estimate of the monetary value of a set of

products which was either even or odd priced, but found no consistent evidence to
support the hypothesis. However, recently, Schindler and Wiman (1983) did find some
evidence in favor of this "rounding down" hypothesis. They asked respondents to recall
prices the respondents had seen two days earlier and found that respondents were
more likely to underestimate odd prices than even prices. Although many respondents
recalled a $9.99 price as $9.89 or $9.50 rather than as $9.00, the fact that they were
less likely to recall a $10.00 price as "9 dollars and some cents" provides some support
for the rounding down hypothesis.
Another common hypothesis is based on the fact that a number of studies,
including at least three field studies (Ginzberg 1936 , Dalrymple and Haines 1970;
Georgoff 1972), have failed to find any reliable effect of odd pricing on sales. This
hypothesis holds that odd pricing actually has little effect on consumer behavior except
that it has created familiar "price points." Many retailers would abandon odd pricing
were it not that consumers tend to consider these price points as "correct" prices, and
will be especially likely to notice, and presumably resist, prices which are raised above
these price points (Nwokoye 1975: Whalen 19805)
Gabor and Granger's (1964) finding that consumer demand may peak at odd
prices for a product which is normally odd-priced but not for a product which is usually
not odd priced provides some support for the price point hypothesis. However, results of
the Schindler and Wiman (1983) study raise questions about the price point hypothesis.
In addition to finding a greater tendency to underestimate the odd prices, Schindler and
Wiman found less accurate recall of odd prices than of even prices. If this accuracy
difference is due entirely to a tendency to guess even prices when the actual price is

forgotten, then it does not bear on the price point hypothesis. But if this recall accuracy
difference is not due entirely to guessing strategies, then it must indicate that
consumers are more likely to forget odd prices than even ones. However, if a consumer
has forgotten a price, then he/she cannot notice an increase in that price. Thus, greater
forgetting of odd prices should lead to consumers being less likely to notice increases in
those odd prices, not more likely to notice them. as suggested by the price point
hypothesis.
Odd prices may repel some consumers as opposed to appealing to them (Harper,
1966). Some retailers now argue that consumers react more positively to more rational
sounding prices such as $4 instead of $3.99. It has even been suggested that some
consumers experience numeracy problems, leading to a price of, say, $3.99, appearing
to be greater than $4. They are fooled by the use of a decimal point into thinking that
three numerals indicates a higher price than the use of one number which is not
followed by decimal places (Gilmour, 1985).
It is also thought that the initial impact of odd prices was due to their uniqueness
(Whaleno). However, because odd prices have been used so often and for so long, any
effect associated with the practice may have begun to wear out It is unlikely that
consumers would find odd prices in any way novel or unique nowadays. People may
also be less responsive to odd pricing now because they have been so conditioned to
inflationary effects for so long that they just do not care about saving a few cents any
more. The argument is that people instead focus on other variables such as quality,
convenience, and durability (ibid.). Furthermore, where odd prices have been arrived at
by making small reductions in price as from $20.00 to $19.95, it should be kept in mind

that, if odd prices do not have the desired psychological effect on customers, the small
reductions in price required to achieve an odd price can decrease a retailer's
profitability, particularly if sales volume is usually large (Georgoff, 1971; Harper, 1966).
Bearing in mind the lack of any empirical evidence to support the concept of odd pricing,
there is a very real possibility that odd pricing needlessly reduces profitability.

STATEMENT OF THE PROBLEM

This study entitled THE PERCEPTION OF THIRD YEAR MARKETING
MANAGEMENT STUDENTS OF NEW ERA UNIVERSITY IN ODD PRICING
STRATEGY aims to determine the effect of odd pricing strategy to the price perception
of students of New Era University.
Specifically, it sought to answer the following questions:
1. How may the respondents be described in terms of:
1.1 Age
1.2 Gender
1.3 Socio-Economic Status
2. How do they perceive the price of the product they are going to buy?

Given the price of Php 499.75

a.
b.
c.
d.

Consumer will perceive the given price as Php 499.75

Consumer will perceive the given price as Php 500.00
Consumer will perceive the given price as Php 499.00
Consumer will perceive the given price as Php 400.00

HYPOTHESIS
1. The students tend to underestimate the price of products with odd pricing.
2. The students tend to overestimate the price of products with odd pricing.

SIGNIFICANCE OF THE STUDY

The research undertaken is deemed significant to the following:
1. Consumers
This study will help broaden their knowledge about the psychological
effect of odd pricing strategy.
2. Companies
This study will help them to become aware about how consumers perceive
their products with odd prices.
3. Students and Researchers
This research study will serve as a guide in making future research
studies. This study will also contribute information that can help students and
researchers to solved different phenomena that will be related in this study.
Lastly, through this study, they will have better idea on improving their studies.

DEFINITION OF TERMS

Companies business organization that sells goods in exchange for money

Consumers one that utilizes economic goods
Odd pricing a pricing strategy that uses odd numbers at the end of the price
Overestimate to estimate something higher than the actual price of the product
Perception the way that we understand or foresee the price
Price the amount or the cost of money that you pay for the product
Pricing strategy the specific strategy that is used to price the products
Underestimate to estimate something as being less than the actual price of the
product

SCOPE AND LIMITATION

Our research study focuses on all related literature and studies regarding the
perception in odd pricing strategy. Books, magazines, theses and specific articles in the
internet will be use as our instrument to gather data.

It is limited up to 194 respondents with the ages 18-21, male and female, third
year students of New Era University, College of Business Administration Major in
Marketing Management.
The researchers aim to finish this study in the covered period, 1 st Semester of the
Academic Year 2015-2016.