Int. J. Business and Systems Research, Vol. 11, Nos.

1/2, 2017 101

The impact of psychological pricing strategy on

consumers’ buying behaviour: a qualitative study

Santosh Kumar* and Mrinalini Pandey

Department of Management Studies,
Indian School of Mines,
Dhanbad, 826004 Jharkhand, India
Email: [email protected]
Email: [email protected]
*Corresponding author

Abstract: The recognition of consumers’ behaviour is crucial for

effective marketing plans. Evidences explain that the psychological pricing
communicates meaning to consumers. This study theoretically examines the
impact of psychological pricing on consumers’ buying behaviour. The study
has used secondary data from research papers, monographs, theses, popular
articles, and newspapers. Findings show that socio demographic factors like
age, income, education, gender, lifestyle, family size, reference groups, social
roles and status and the psychological patterns like representativeness,
availability of products and the anchoring heuristics are key factors which
influence consumers’ buying behaviour. Additionally, the consumers, who are
more price cognisant are more probable to select nine-ending prices. Indeed,
low involved customers, those with a small hedonic and symbolic attachment
profile, low educated, low income and younger customers are prone to select
the nine-ending priced products and services. The findings can have
implications for retailers, pricing managers, researchers, academicians, society
and government.

Keywords: psychological pricing; nine-ending prices; consumers’ behaviour;

strategy; influence; perception; odd-even prices; retail prices; consumers’
attitude; consumer psychology.

Reference to this paper should be made as follows: Kumar, S. and Pandey, M.

(2017) ‘The impact of psychological pricing strategy on consumers’ buying
behaviour: a qualitative study’, Int. J. Business and Systems Research, Vol. 11,
Nos. 1/2, pp.101–117.

Biographical notes: Santosh Kumar is a doctoral student at the Department of

Management Studies, Indian School of Mines, Dhanbad, Jharkhand, and India.
He received his MBA from Vinoba Bhave University, Hazaribag, India. He
published some articles in the peer reviewed international journal and
conference proceedings.

Mrinalini Pandey is an Assistant Professor at the Department of Management

Studies, Indian School of Mines, Dhanbad, Jharkhand, and India. She received
her MBA from ISM-Dhanbad, India, and PhD in Management from
ISM-Dhanbad, India. She obtained her Master’s in English. She published
several research articles in reputed and peer reviewed national and international
journals and conference proceedings. She has written several books.

Copyright © 2017 Inderscience Enterprises Ltd.

102 S. Kumar and M. Pandey

This paper is a revised and expanded version of a paper entitled ‘Psychological

pricing strategy and consumers’ buying behavior: a review’ presented at
ICEBM-2015, BITS-Pilani, India, 20–21 March 2015.

1 Introduction

Contemporary market of the world is highly stiff and competitive, and it is very
challenging for the business organisations to sustain and grow in such a cut throat
business world. It is very vital to recognise the consumers’ behaviour also. The growing
pressures of extremely competitive marketing environments make it crucial that
organisations realise consumers and, in particular, consumers’ decision-making process
as they seek to gain competitive advantage. In the current economic system, the survival
and growth of the organisations require accurate knowledge about consumers: how they
buy, why they buy and where they buy from as well as what they buy. Hence,
contemporary marketing thought stresses the need of business managers to know who
their customers are and why they choose their products and services rather than those of
competitors. The success of any retail organisations depends above all on the consumers
and what they are willing to accept and pay for. Top management must achieve the
integration of all elements of marketing strategy (i.e., 4P’s product, price, place and
promotion) into a single strategic plan based upon knowledge of consumer behaviours.
According to the society for consumer psychology, division 23 of the American
Psychological Association, consumer psychology employs theoretical psychological
approaches to understanding consumers (Cherry, 2014).
For sustainability and continuous growth; capital is required, and to get capital the
organisations have to price their products and services using an appropriate pricing
strategy. Price is the only pillar of the marketing mix which generates revenues while the
others, such as product, place, and promotion are expenses for the organisations. To
develop the effective marketing plans consumers’ behaviour is crucial. The Pricing
strategy is one of the marketing strategies which can make the organisations progressive
with augmented sales and profitability. There are several pricing strategies and
psychological pricing is one of them. The psychological pricing is a marketing or pricing
strategy based on the theory that certain prices have psychological impacts on the
consumers’ price perception, attitude and their buying behaviour. This strategy has
been exercised by the marketers and the organisations to influence the consumers’
decision-making process for a long period of time, especially in the retail sector and in
the price advertisements. The retail prices are often expressed as ‘psychological prices’,
i.e., a little less than an encircling figure (e.g., `20.49, `99.95, `92.99, `99 or `199). The
Consumers tend to perceive psychological prices as being significantly lower than they
actually are, and tending to encircle to the next lowest monetary unit. Thus, a price such
as `5.99 is associated with spending `6.00 rather than `5.00
Pride and Ferrell (1997) suggest that, the psychological pricing is an art of scheming
prices to appeal to consumers’ emotions and psyche in order to influence their purchasing
behaviour. Pricing is a play on the customers’ price perception. It is the consumers’
perception of the price that influences them to purchase products or services, and not the
actual money price. In several situations, the psychology of pricing and price perception
are more significant than the actual price of the products or services. The organisations
 The impact of psychological pricing strategy on consumers’ buying behaviour 103

that understand the role psychology plays in their pricing strategies can succeed in the
market. Stivings (1996) suggests that pricing is a multi-faceted technique, so, after
producing a product, the vital concern that must be considered is: how much the
customers should be charged for a product? This problem is not solved only by
manufacturers, but also wholesalers and most especially the retailers. This is necessary to
understand that, customers respond differently if the price is broken into parts (e.g.,
`99.99 instead of `100 or `49.95 instead of `50), or the products or services are bundled
with other items (e.g., buy one and get one free). The customers process prices
differently, and they may never know what is in their minds when they perceive prices,
and how this affects their buying behaviour. The customary economic thinking assumes
that marketers are always efficient whereas the participants are always rational. However,
the consumers behave differently, sometimes even irrationally when offered with a
variety of triggers. While setting prices, it is important to note that price perception plays
a big role in customers’ purchasing decisions. If the right pricing strategy is used for a
product in the market, and such a strategy is supported with robust promotional and
placement or distribution programs, the business can have leveraged sales and can
experience business growth. However, a wrong pricing strategy can be very costly for the
organisations. There are different pricing strategies that are used by firms. One of the
most commonly used pricing strategy which is widely applied for consumer goods across
different product categories in retail markets and newspaper advertisements is the
psychological pricing or nine-ending pricing strategy.
Nagle and Holden (1995) suggest that the psychological pricing strategy is a common
practice in the marketplace which uses certain odd and even digits as price endings
(examples: $ 0.99 in $4.99 and $0.00 in $3.00), and has the potential to influence
consumers’ perception of the price of the product. Friedman (1967) and Dalrymple and
Thompson (1969) suggest that the actual origin of nine-ending pricing is not very clear.
On the contrary, Schindler and Wiman (1989) found that the use of psychological pricing
or nine-ending pricing has been evident for more than 100 years. Asamoah and
Chovancová (2011) suggest that the practice of psychological pricing in retailing has
become widespread in many countries. Even though, the results have been to some extent
contradictory across the product categories and the countries. The accomplishment of
nine-ending prices seems to be suitable, especially regarding low-priced products, which
are bought often. The fundamental assumptions of psychological pricing are that, prices
set just below the nearest encircled figures produce a higher demand than the expected
demand at that level. This indicates that the purchasing probability for just-below price is
positioned well to the right of estimated demand curves that generates a kink in the
demand curves at these points. According to Holdershaw et al. (1997), the psychological
prices are known as magic prices, charm prices, odd prices, irrational prices, intuitive
prices or rule-of-thumb prices as cited in Asamoah and Chovancová (2011). Kreul (1982)
states that these are not rooted in the strict mathematical calculations or long standing
economic theory.
Kotler and Keller (2005) suggest that, economists who study consumers’ behaviour
are of the view that consumers are price takers and accept prices at face value or as given
by the producers. Marketers acknowledge that consumers often vigorously assess price
information, decode prices in terms of their knowledge from previous buying
experiences, formal communications (advertising and sales promotions), informal
communications (friends, colleagues, family people), and point of purchase. Asamoah
and Chovancová (2011) suggest one of the views, that there are two distinct effects
104 S. Kumar and M. Pandey

associated with psychological pricing strategy and consumers’ buying behaviour. The
first one is ‘the Level effects’ which is also known as underestimation effect. It highlights
the behaviours or fundamental processes that lead buyers to twist their perception of the
price. For instance, one frequent hypothesis concerning level effects is that buyers are
inclined to encircling numbers down, making a buyer thinks that $28.99 is much lower
than $ 30.00
The second is ‘the image effects’, which leads a buyer to form perceptions about the
product, store or competition, on the basis of the right hand digits of the price of the
products or services. For instance, buyers may think that a product with a price that ends
in nine is on special offer. Each of the suggested level effects is an interpretation of the
way buyers’ process the information regarding the digits of the price of the products (i.e.,
it is their mental processing), totally unrelated to business behaviour. Alternatively, the
image effects focus on buyers’ perceptions of organisation behaviour. The customers
may, deliberately try to discover organisations’ intentions while decoding certain prices,
or they may, over time, subconsciously realise the correlation between price endings and
quality of the products.

2 History of practice of psychological pricing strategy

O’Reilly (2014) states that, the psychological pricing strategy came into practice in the
USA in the late 19th century. This strategy was first used in a newspaper pricing
competition by Melville E. Stone, who started the Chicago Daily News in 1875. In1876,
Stone observed that Chicago required one cent Newspaper to compete with the Nickel
Papers of the day. Therefore, he decided to price his newspaper at one cent. Those days,
as most of the goods and the services were priced at even-dollar figure. The current
competition provoked Stone to think of a strategy. He tried to understand the consumers’
psyche and persuaded many Chicagoan merchants, who used to advertise their products
and services in his newspaper. The merchants were told to drop the price of their products
and services by one cent. They were explained that impulsive buyers would more readily
purchase a $5.00 item if it cost only $4.99. The merchants who used this strategy
observed that it really worked. This strategy increased the sales of the newspaper and at
the same time the sales of the products priced with this strategy got increased by 60%.
However, there was a problem that, there were not sufficient pennies in the general
circulation, therefore, Stone import barrel of pennies from the Philadelphia to meet the
shortage. The cost of importing the pennies was less than the profit made on sales of the
newspaper. It has been explained by some researchers (Burns, 1995; Hower, 1943) as
cited in Harris and Bray (2007), that odd-ending pricing was brought into practice for
operational reasons with the introduction of cash registers in 1879. The reason behind this
was assumed to be that shop proprietors wanted to make sure that tills were open for
every transaction to prevent the dishonest cashiers from pocketing the cash. However,
opposing operational considerations have also been offered, explaining that several
retailers have adopted round-ending prices to prevent the need to provide change, thus
speeding transaction and reducing in-store queues (Stiving and Winer, 1997). There is
another explanation for the practice of odd ending prices (Asamoah and Chovancová,
2011), in 1920, this pricing system was used by Tomas Bata that gave the ending price of
goods almost always in number nine. Even today, the ‘Bata price’ method is used in Bata
shops within and outside.
 The impact of psychological pricing strategy on consumers’ buying behaviour 105

3 Rationale of the study

The modern market is global and at the same time extremely competitive. Therefore, an
appropriate pricing strategy should be used by the organisations to sustain in the market.
Why do the retail organisations use psychological pricing strategies? Do these strategies
augment sales and profitability of the organisations? If yes, then what are the reasons
behind consumers’ preferences for nine-ending pricing? What kinds of consumers are
more likely to go for nine-ending pricing? What are the factors which make the
consumers go for nine-ending pricing? The psychological pricing strategies are
widespread in the retail sector and in the price advertising?

4 Literature review

A number of research studies have demonstrated that psychological pricing strategies do

impact consumers’ buying behaviour. An attempt has been made to review the studies
associated with the psychological pricing strategies, that are practiced by business
organisations, especially dealing with FMCG and Home Appliances in the retail sector,
and the price advertising to influence consumers’ buying behaviour, as consumers are
influenced by socio-demographic factors (ex. age, income, education, gender, lifestyle,
family size, reference groups, and social roles and status), and psychological patterns (ex.
representativeness, availability of products and anchoring heuristics).
Rudolph (1954), Friedman (1967), Kreul (1982), Stiving and Winer (1997), Schindler
and Kirby (1997) and Stiving (2000) have considered that psychological pricing strategy
or nine-ending pricing strategy has been used since 1875. Several marketing researchers
have been studying about it since 1930, and have examined the extent to which the
psychological pricing strategy has been used in the marketplace. Friedman (1967),
Stiving and Winer (1997), Stiving (2000) and Naipaul and Parsa (2001) have studied and
identified a numeral digit combination like 95, 99, and 00 as the principal price endings
used by organisations depending on price level, market segment, and product category.
The 00-ending price is used for high-priced, high-quality, or upscale organisations;
whereas 95-ending price is used for mid-priced or average quality organisations; and
99-ending price tends to be used extensively for low-priced, low-end organisations or
organisations promoting a high-value image. Kalyanam and Shively (1998) and Schindler
and Kibarian (1996) suggest that customers are sensitive to small differences in price;
such that a penny reduction reflected in a nine-ending decreases the perception of a price,
often, leading to a considerable augment in sales. Manning and Sprott (2009) found that,
the extant study has paid significant attention to the impact of nine-ending prices on
purchase decisions and a few studies have examined its usefulness in conjunction with
other critical components of an advertisement. Holdershaw et al. (1997) suggests that, the
application of psychological pricing in retail sectors is so extensive that its effectiveness
is generally considered guaranteed. The term psychological pricing is used in several
ways. It can be referred as the exercise of ending prices in odd numbers (examples: 1, 3,
5, 7, 9); that of ending prices in a numeral other than zero; or that of pricing just below a
zero numeral (examples: $1.99, $6.99 or $8.95). Gendall (1998) supports the assumption
that odd prices generate greater than expected demand. Also, the widespread practice of
setting retail prices that end in 95 cents or 99 cents. One of the uses of psychological
pricing is in the price-ending numeral. The buyers believe that, the prices ending in
106 S. Kumar and M. Pandey

uneven, rather than even numbers such as $9.99, $199,999 are a better deal or a better
price than even numbers (e.g., $10.00 or $200,000.00). If the products, to be priced are in
a price ‘band’(such as online auctions, or cars or other sales listings), and if the listing
price is in the odd range, say $99,000, it will appear in a lower price band than the
$100,000 listing and will be viewed as a product of better value. The challenge with this
strategy is that, products ending in odd numerals are also often thought as being lower in
value. Therefore, Blinder (1998) suggests, it is very significant for marketers and retailers
to define the right strategy for pricing specific product or service.
Holdershaw et al. (1997) has researched about the widespread use of psychological
pricing and suggests that, such price endings are important in the development of
marketing strategies, especially for retailer of fast moving consumer goods. In the past,
retailers had a presumption that pricing a product just below an encircling number was
beneficial. Georgoff (1972) and Bray and Harris (2006) found although, some researchers
doubt the success of such a practice, but its use has not ceased. A number of researchers
such as Schindler and Kibarian (1996), Georgoff (1972) and Schindler and Warren
(1988) have tested the impact of psychological pricing on consumers. Mixed results
indicate that this pricing strategy will affect some consumers’ perception of a product or
store quality and/or value. Also, some studies in the past had found conflicting results,
with some products supporting prices with encircling figures while some products in
which psychological pricing strategies were used to generate much higher sales.
In a study by Suri et al. (2004a), prices ending with numeral nine were less common
and less accepted as a fair price in retail shops in Poland’s compared to countries like the
USA. Also, Rudolph (1954) found that out of 3,025 retail stores-advertisements in
newspapers 64% of the prices ended in odd digits. In another exploratory research on
retail food prices it was found that prices ending in nine were most popular. Twedt (1965)
found that, prices ending in digit 5 are the second largest in terms of popularity. Also,
Friedman (1967) found that, about 80% of retail prices ended with 9s and 5s.
Additionally, Blattberg and Wisniewski (1989) did another extensive analysis of scanner
data from a major supermarket also showed that more than 80% of the prices in the shops
ended with numeral nine. A more recent research by Harris and Bray (2007) discovered
that 64% of prices in the UK ended with a digit-nine and other researches by Bergen et al.
(2004) with internet-based shops also showed a nine-ending price. Also, Schindler (2001)
and Guéguen and Legoherel (2004) found the presence of the same trends in the retail
shops in western economies. Nguyen et al. (2007) found that, the nine-ending pricing or
psychological pricing is a common and perhaps overused marketing technique in western
markets. Schindler and Kirby (1997), Stiving and Winer (1997) and Schindler (2009)
observe that up to 65% of all prices end with a digit-nine in the USA. Gendall et al.
(1997) finds the same in New Zealand. Suri et al. (2004b) finds the same in European
markets such as Poland and Finland (Aalto-Setala, 2005). The underlying assumption
which encourages retailers to apply these prices is that consumers may underestimate the
value of nine-ending prices or psychological prices for two main reasons. First by
encircling down nine-endings or by considering that nine-ending prices are the cheapest
options. These effects are respectively called ‘the level effects’ (Thomas and Morwitz,
2005) and ‘the image effects’ (Schindler, 2001), and have been made clear, however,
separately identified, which do not account for their relative significance.
Guéguen and Legoherel (2004) states that, the empirical research associated with the
psychological pricing strategy indicates a great variability in the impact of nine-endings
on the consumers’ perception. Schindler and Wiman (1989) and Bizer and Schindler
 The impact of psychological pricing strategy on consumers’ buying behaviour 107

(2005) state the same for the recall. Baumgartner and Steiner (2007) and Manning and
Sprott, 2009) state the same for the choice. Stiving and Winer (1997) finds the same for
the sales including effects, that are substantial, medium, weak, and even negative in some
situations. In turn, there is a compelling need to explain, under which processes and
conditions nine-ending prices are effective.
A study in the UK based on non-fashion retailers discovered that sales in most of the
instances rose when product prices were augmented from odd ending to even ending
prices (Bray and Harris, 2006). A study by Harris and Bray (2007) demonstrates that men
and women do take price endings differently, and that women are more likely to favour
odd-ending prices. The odd-ending prices or the psychological prices create
psychological illusion (Basu, 1997) because of this the customers get attracted toward the
products priced with odd-ending prices. The odd-ending prices do affect the attitude and
buying behaviour of the consumers (Schindler and Kirby, 1997) i.e., the sales of the
products get increased. According to Wedel et al. (1998), consumers take price endings
as an indicator of product quality and the consumers are very heterogeneous to the price
endings. By analysing diverse responses and cost functions, Gedenk and Sattler (1999)
explained that a retailer should normally set nine-ending prices unless he has doubts for
robust quality image-effects of price endings. Approximately 90% of all the prices of
consumer goods and services in the Netherlands are psychological prices (Folkertsma,
2002). According to Hoffman et al. (2002), retail service pricing strategies have aspects
and features that make them unique from the pricing of goods. A study by Thomas and
Morwitz (2005) explains that reducing a price by one cent to a 99-ending affects amount
perceptions when the left digit of the price changes (e.g., $5.00 to $4.99) however, does
not affect amount perceptions when the left digit of the price is unchanged (e.g., $5.20 to
$5.19 or $4.80 to $4.79) also, nine-ending prices may sometimes but not always be
perceived to be lower than a price one cent higher.
According to Schindler (2006), analysis of two samples of price advertising points
that there is a strong and robust correlation between the practice of the 99-ending prices
and the presence of the low price appeal such as a claimed discount. Also, that the
salience of price advertising leads it to dominate other sources of information in the
customers’ learning of price-ending meanings. Also, that the retailers, the regulators and
the customers should give explicit consideration to the meaning that can be transmitted
by the rightmost digits of the product prices and the price advertising. Baumgartner and
Steiner (2007) analysed consumers’ preferences for nine-ending versus zero-ending
prices at the individual level and observed that some consumers strongly prefer
nine-ending prices, whereas the other consumers favour zero-ending prices. Also,
observed that few consumers behave rationally in the sense that they prefer lower prices
to higher prices. 38% of the consumers favour the round price and probably use it as a
quality indicator, while 29% of the consumers prefer nine-ending prices and seem to
associate the digit nine with the opportunity to buy brand cheaper. According to Guéguen
et al. (2009), an augment in the choice of the target pizza by the customers was observed
when the price of this item was nine-ending price and the prices of the other items ended
with zero. Ngobo et al. (2010) conducted an analysis on over 11,000 stock keeping units
in 102 product categories of two grocery retailers and found that the effect of 99-ending
prices on the SKU’s category choice are larger in concentrated and promotional
categories but smaller in classy categories. However, their influence on purchase quantity
is larger in classy categories, but smaller in concentrated categories. A study by
Kleinsasser and Wagner (2011), explains that consumers of higher-priced goods might be
108 S. Kumar and M. Pandey

influenced by the price endings, just as consumers of lower-priced good are. Also,
personal involvement and price interest have a moderating effect on perceptions of such
price endings. Also, odd prices make sense for sellers of higher-priced goods. A study by
Bambauer-Sachse and Grewal (2011) reveals that reframed prices are more favourable
than cumulative pries for high-price products, especially in combination with even price
endings, a cumulative price that normally refers to a comparatively short time period, or
customers with poor computation affinities. Cumulative prices offer more benefits than
reframed prices for low-priced products, odd price endings, cumulative prices that refer
to longer periods, and customers with brilliant computation affinities. According to
Grewal et al. (2011), innovations in the retail pricing and promotions increase the sales.
Carver and Padgett (2012) state that, when a product is priced above/below a stimulus
set, using 99-ending prices for the highest and the lowest prices in the stimulus set lessens
target price attractiveness compared to when the highest and lowest prices are 00-ending.
The charisma of targets priced within the stimulus set was not affected by the practice of
99 versus 00-ending pricing. Overall, participants appear to use an assimilation/contrast
approach based upon left-digit processing in determining target price attractiveness. A
study by Macé (2012), the impact of nine-ending can lead to sales losses (e.g., premium
brands); however, a nine-ending price is more effective for increasing sales of small
brands (e.g., low market share, low price, and low items) that belong to weaker categories
(e.g., low price, low budget-share). The impacts wear down as the store’s nine-ending
pricing practices strengthened. For category sales, a simulation unveils the existence of
threshold for which over practice is counterproductive.
According to Murthi and Rao (2012), in a scanner data on ketchup and peanut butter
category, it was found that between 40% and 50% of the purchases were made by
consumers using expectations of prices rather than posted prices. Consumers using price
expectation may be thought of as being unaware of prices. It was also found that
promotions cause some consumers to focus exclusively on promoting brands, and this
effect was greater on the price aware consumers than on the price unaware consumers.
Also, it was observed that the rationality of consumers’ expectation of prices, especially
of the promoted or advertised products or services. Price aware consumers acted as a
check against firms promoting without accompanying price cuts. A study by Olavarrieta
(2012), explains that a variety of in-store price knowledge antecedents by section. In
particular, the outcome of price symbols was significant in the female sample, while the
outcome of shopping frequency was significant in the male sample. The consumers
choose round prices and/or sales amounts more often than expected by the chance (Lynn
et al., 2013). A study by Hackl et al. (2014), has shown that price points (especially
prices ending in nine or zero) were not-the-less prevalent in e-commerce. Also, it was
found that prices ending in nine were stickier than regular or even prices. Ahmetoglu
et al. (2014) explain that the clean presentation of price alone – that is, independently
from an actual price change have a significant impact on the consumers’ price
perceptions and buying behaviour.
A recent study by Mulky et al. (2014) in India, explains that the Indian consumers
perceive nine-ending prices as an indicator of high value and the product is on sale and
also the consumers remember the products and priced using odd-pricing.
A more recent study by Kumar and Pandey (2015) explains that, the psychological
pricing strategy is an augmentative technique that organisations can adopt to increase
their sales of products and services in the potential markets.
 The impact of psychological pricing strategy on consumers’ buying behaviour 109

5 Major gaps for future research (RI = recent issues)

While investigating the literature for this study, it became evident that the number of
research publications that pertained to retail pricing issues was scarce. In an attempt to
raise awareness and spark interest in pricing issues, this article has attempted to present
insights into the basic differences that should be considered when pricing retail products
and services. In developing these differences, a number of potential research issues
emerged. Table 1 provides an inventory of potential future research issues. It is hoped
that this inventory will help those interested in pursuing a pricing research stream.
Table 1 Future research issues of psychological pricing

RI 1 First of all, it can be said that previous research on several pricing strategies has been
rambling and irregular. The reference pricing, bundling products, and drip have gained
the most amount of attention and the proof is relatively consistent about their impact.
But, there are relatively scarce study of ‘free’ offers, bait pricing, and time limited
offers. There is an important gap in the studies with respect to the impact of individual
differences upon the weakness to pricing practices. Thus, the study of individual
differences may give a fruitful opportunity for further research and may show to be
very relevant for retailers and manufacturers.
RI 2 In the future, a study of brand reputation and price ending may be done. And such a
study may disclose the implications of the interrelationship between branding and price
endings on the customers. Moreover, the perception of managers may be sought on the
reasons for practicing odd pricing strategy and its direct impact on daily sales and
revenue of retail organisations. It would be crucial to look at the trends and
implications of the psychological pricing strategy on different product categories. It
would also be crucial to conduct further research into the factors and variables that
determine the general impact of odd pricing on customers’ demand.
RI 3 Since, round prices were on an average more than prices ending in nine, and prices
ending in nine were on an average more than prices ending in 5, customers would
logically prefer a five-ending to a nine-ending, and a nine-ending with a zero-ending.
Further research can be conducted on this issue to explore the implications from
different price level settings concerning the correlation between price ending and total
price.
RI 4 A study can be conducted to examine whether psychological pricing strategy plays role
in the industrial pricing strategy.
RI 5 It would be interesting to examine whether the brand image influences the
effectiveness of sequential price reframing. For example, customers might be less
cynical of temporally reframed price if the organisations practicing them have a very
good reputation.
RI 6 The study has explained store quality image theory to explain the nine-ending prices.
However, the behavioural and operational theory of nine-ending prices can be
examined.
RI 7 It may be worthwhile to examine why relatively high levels of motivation to carefully
provide estimates led to weaker nine-ending effects. Future research may also be
carried out to determine precisely wherein price-information processing the drop-off
effect takes place.
RI 8 Further research is needed to see what degree of form loyalties exist (e.g., tub versus
stick margarine buyers, oil versus water tuna buyers etc.,), and/or if such loyalties can
be related to price differentials caused by differing ingredients and production
technologies.
110 S. Kumar and M. Pandey

Table 1 Future research issues of psychological pricing (continued)

RI 9 A further research can be conducted to examine why customers select certain products,
merely to measure the impact of different price endings.
RI 10 It is found that when consumers possess low to moderate levels of familiarity with the
product category; practice of nine-versus zero-ending pricing significantly affects
target price magnetism (Carver and Padgett, 2012). However, a study can be conducted
to examine the practice of nine-versus zero-ending prices when consumers are highly
familiar or entirely not familiar with the product categories.
RI11 ‘Consumer preferences for 99-ending prices: the mediating role of price consciousness’
is significant (Gaston-Breton, 2011). However, he has failed to examine whether
consumer preferences for 99-ending prices is also significant to shopping markets (e.g.,
countries or stores) in which 99-endings are not widely used, to product types (e.g.,
hedonic products, services), and situational variables (e.g., time pressure, complexity of
the task) that would probably affect the impact of nine-endings on choice.
RI 12 Hackl et al. (2014) conducted a study on 99 cents: price points in e-commerce and for
the purpose, the data were taken from an Austrian price comparison site and was found
a remarkable prevalence of such price setting. Do Indian price comparison sites show
any remarkable prevalence of nine-ending price in e-commerce?
RI 13 The price endings affect price perception of higher-priced goods. Addition to personal
involvement and price interest, other moderating variables might influence perceptions
of price endings, such as consumers’ lifestyle and purchasing experience or the social,
situational, or demographic factors which are evident in the buying context. However,
do price endings influence price perceptions of low priced or moderately priced goods
or groceries?
RI 14 The preference for round prices on self-pumped gasoline purchases exists (Lynn et al.,
2013). However, it does not demonstrate that this preference actually underlies the
clustering of market prices.
RI 15 The impact of nine-endings can lead to sales losses (e.g., premium brands); however, a
nine-ending price is more effective for increasing sales of small brands (e.g., low
market-share, low price, and new items) which belong to weaker categories (e.g., low
price, low budget-share). The effect erodes as the store’s nine-ending pricing practices
intensify. The rival brands are likely affected by competitors’ nine ending pricing and
could suffer from decreased sales as a result of switching effects. Which brands suffer
most from rival nine ending pricing? Do these effects match the price tier predicted by
theory? In other words, are high-priced brands more powerfully affected by the
nine-ending pricing policy of a lower-priced competitor? Further research should
address these problems, which can have major consequences for a retailer’s global
performance.

6 Objective of the study

The objective of this study is to examine theoretically the influences of nine-ending

prices or psychological pricing strategy on consumers’ buying behaviour.
 The impact of psychological pricing strategy on consumers’ buying behaviour 111

7 Data and methodology

The data for this study have been taken from the secondary sources. Several journals,
publications, working papers, books and published articles have been reviewed for the
purpose. The whole of the study is based on the conceptual framework, which has been
framed on the basis the factors found in the various psychological pricing-based
literatures, and on their relationships. The main elements in the framework are
consumers’ socio-demographic factors, psychological patterns, attitude and buying
behaviour.

8 Conceptual framework and discussion

Our conceptual framework is presented in Figure 1 and is elaborated upon in the sections
as follows

Figure 1 Showing the conceptual framework of the psychological pricing strategy and the
consumers’ buying behaviour

Source: Kumar and Pandey (2015)

8.1 Socio-demographic factors

The factors which influence the customers socially and demographically to choose
nine-ending price or psychological price to buy a product or service are called
socio-demographic factors. These factors include age, income, education, gender,
lifestyle, family size, reference groups, and social roles and status (Gaston-Breton, 2011).
The low income people prefer the psychologically priced products and services. The
younger buyers, low educated people, women, simple life styled people; people having a
large family size and the people having medium social status are prone to choose the
112 S. Kumar and M. Pandey

nine-ending priced products and services. The reference group a person has also
influences the customers for choosing the psychologically priced products and services.
Gerontologists and psychologists specialised in cognitive ageing have demonstrated that
relative to younger adults, older adults appear to exhibit greater use of schema-based as
opposed to detailed processing strategies (Phillips and Sternthal, 1977). In other words,
older consumers rely more on heuristics than younger consumers. Low educated and high
income consumers are also expected to engage in heuristic information processing
because, respectively, they should have less ability to actively process the information
and less motivation to do so. The shoppers, who are relying on a heuristic process of the
information, ought to be more sensitive to nine-endings. Therefore, while little attention
has been directed to exhibit the effect of age, education, gender, lifestyle, and family size
of nine-ending choice (with the exceptions of Harris and Bray, 2007; Macé, 2008).

8.2 Psychological patterns

The psychological patterns like representativeness, availability of products and anchoring
heuristics influence the customers to go for nine-ending options. The representativeness
and the availability of the products influence the customers with a positive attitude that
leads them to buy the products and service of nine-ending prices. The anchoring
heuristics refer to the customer’s tendency to accept and rely on, the first piece of
information received before making a purchase decision. That first piece of information
is the anchor and sets the tone for everything that follows. For example, a retailer might
suggest a price for a product and the customer will try to negotiate down from that price,
even if the price suggested is more than the blue book value.
The socio-demographic factors (e.g., age, income, education, gender, lifestyle, family
size, reference groups and social-roles and status) and psychological patterns (e.g.,
representativeness, availability of products and anchoring heuristics together influence
the attitude of customers, which make the customers buy nine-ending priced products or
services.

9 Findings

The Psychological pricing strategy has a greater influence on the consumers’ buying
behaviour. The results indicate that, the consumers who are more price conscious are
more likely to choose nine-ending prices. Indeed, low involved shoppers (especially
those with a low hedonic and symbolic involvement profile), low income, low educated
and younger shoppers are prone to choose the nine-ending option. It is also found that the
magnitude of this nine-ending price effect depends upon the price level of the products
and the positioning of the brands. Overall, like Baumgartner and Steiner (2007), we argue
that consumers are heterogeneous in their preferences for nine-ending prices. On
extending this idea, results show that involvement and especially its hedonic and
symbolic profiles have direct and indirect effects on nine-ending preferences.
Socio-demographic factors like age, income, education, gender, lifestyle, family size,
reference groups, and social roles and status indirectly affect preference for nine-endings
through the mediation of price consciousness. The nine-ending prices or psychological
pricing effects are mostly due to a conscious process of price, which means that
consumers are more likely to choose the nine-ending price option because they consider
 The impact of psychological pricing strategy on consumers’ buying behaviour 113

that it makes them save money. The nine-ending price effects are stronger for the
intermediate priced product category and lesser for higher brands. The psychological
patterns like representativeness, availability of products and anchoring heuristics also
influence the attitude of consumers, which lead them to buy the products or services.

10 Conclusions

It is concluded that the psychological pricing strategy is an augmentative strategy that

companies can adopt to leverage their sales and profits in the potential markets. This
paper elaborates the theoretical, conceptual and practical aspects of the psychological
price perception. It provides ways about how psychology is applied by marketers in the
pricing of goods and services. Psychological pricing or nine-ending influences
perceptions of the consumers on different categories of goods such as FMCG and Home
Appliances and determines their purchasing habits. The study concludes that
socio-demographic factors like age, income, education, gender, lifestyle, family size,
reference groups, and social roles and status and the psychological patterns like
representativeness, availability of products and the anchoring heuristics of consumers
influence them to choose the psychological pricing strategy that leads to their buying
behaviour.

11 Managerial implications

The implications of psychological pricing strategy or nine-ending prices for marketing of

a product or service cannot be overemphasised. Managers of firms, especially retail stores
must realise that nine-ending prices would have a significant influence on the level of
sales of products. Conventional wisdom suggests that, if a particular pricing strategy, i.e.,
psychological pricing strategy generates higher sales and revenue then, it should be
practiced by the managers. The managers of retail stores must be aware that, it is possible
for buyers to have a preference for round prices, rather than odd ones especially when
they have difficulties in forming a reference price. Also, the managers should take
cognisance of the possibility that odd pricing strategy tends to elicit a discounted-price
image when round prices are used. That is to say that, the effect of psychological pricing
strategy is most effective when it is used for fast moving consumer goods and the even
pricing strategy has a potential of being efficient for luxury or high-end consumer
products. The psychological pricing strategy has a propensity of providing significant
implications for the positioning of retail goods. The managers must be aware that, the
psychological pricing or nine-ending pricing alone does not sell a product or service.
However, a strong sales rapport or relationship with customers also contributes to the
selling of the products; it should be known that psychological pricing also complements
the selling strategies. The results of this review paper can be implemented by the
marketers to understand the psychology of the consumers and their buying behaviour that
is influenced by the socio-demographic factors like age, income, education, gender,
lifestyle, family size, reference groups, and social roles and status and the psychological
patterns like representativeness, availability of products and the anchoring heuristics.
114 S. Kumar and M. Pandey

12 Academic implications

This study would be beneficial for academicians because the findings provide an
important insight to them and they can use its results for empirical verification, that is to
say whether, this strategy also works in other product categories and also for imparting
knowledge to the management students. Pricing decisions need a thorough competitive
intelligence and research for a strong understanding of the market and most importantly
the culture of buyers. Psychological pricing may be the best fit for a retail business, but
care must be taken to ensure that the pricing strategy decisions have been thoroughly
tested to examine its viability in the market before it would be implemented. This study
provides various theory-based explanations and suggests predictions in a systematic and
structured way. This article provides a more thorough understanding of nine-ending
pricing implications. The findings of this study could have implications for the future
researchers, marketers, government agencies and various business organisations, also.

13 Limitations

Since, there are limited researches on psychological pricing strategy or nine-ending prices
to declare that this strategy influences consumers’ buying behaviour in India. The present
study is based on the studies mostly done in the western countries. Further the study uses
only secondary data solely based on the researches fully available on the topic. There
may be some instances where important papers could have been missed out. An empirical
study can be conducted to know the impact of psychological pricing on Indian
consumers.

14 Scope of future research

Though in practice psychological pricing is used across sectors but there is a dearth of
studies in this area, specifically on effect of psychological pricing on Indian consumers.
Therefore, there is a definite scope of research in this domain. As it is a review paper and
so there is a scope to do empirical research on psychological pricing strategy and
consumers’ buying behaviour.

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