Price endings and consumer segmentation.

Abstract

Purpose – To investigate the area of price endings to determine which groups of consumers are more likely to use odd-endings as opposed to round-endings. Design/methodology/approach – A questionnaire was developed that tested respondents' use of odd-endings as opposed to round-endings dependent on classification by gender and age. Respondents were required to estimate the price they would be expected to pay in stores for six products. This methodology enabled the researchers to generate a large sample size and to encourage accuracy of response. Findings – The main finding was that there was a difference between gender groups; women were more likely to respond with odd-endings than men and hence segmenting the market is the way forward when investigating price endings. Research limitations/implications – The research only considers segmentation by gender and age. Further research needs to be undertaken to fully understand the consumer responses. Practical implications – Although the difference between 99 cents and a $1.00 is small, for high volume items this can have a significant impact on gross profit and margins, particularly for low value items. If retailers understand which groups of consumers were more likely to be attracted to the round-endings they could use this knowledge to determine the most effective prices. Originality/value – This research follows on from a price trial conducted into price endings and is the second phase of an investigation into whether odd-endings are effective. It proposes a theory that has been empirically tested and points the way forward for future research in this area.