The Left Digit Effect in Pricing Strategy Essay Example for Free

The Left flesh Effect in Pricing Strategy EssayHave you ever come across cost 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 terrible bill? Do you notice that the 9 endings argon usually printed in a much little size than the chassiss on the remaining? This is a result of a psychological concept called The Left Digit Effect in which people black market to pay more attention to the left- to the highest degree chassiss than the ones on the salutary. The idea has been wide used for decades for its great impact on consumers shopping behavior.Nine endings can easily be seen over 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 much(prenominal) a grim change can make a price tag seem significantly lower than other one of just one penny or one dollar higher, as well as greatly aff ect 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 walloping bill.Later I realized that I had fallen victim of the usage of the left digit feeling in price strategy. However, it is fascinating to learn about how the application of such a simple belief turns out to have a great impact on peoples mind without their scour being aware of it. The left digit effect can be simply defined as peoples paying disproportionate attention to the digits on the left compare to the ones on the right. This results from pieces instinct of reading from left to right. Another possible reason is that the encode processes in gays mind start before people even finish reading all of the digits.They tend to think fast in order to move on with other affaires, so they underestimate the splendor of the right digits and make the digits on the left the magnitude. Taking ad vantage of that, companies and producers apply the effect in pricing strategy. That was the point when 9 endings were brought into the market. angiotensin-converting enzyme reason to account for such a wonder that the 9 endings are doing to businesses is the difficulty of adding up odd numbers. People are more familiarized with the decimal number establishment which consists of 10 numbers. As a consequence, the appearance of 9 endings in prices is a great change in peoples ability to do the math.They make it much harder to control the total devolveing as people are used to dealing with round numbers. For example, it is obviously easier to add 300 and 200 than 299 and 199, as the first one is 500 and the support one is 498. When not being capable to add up the prices, people are unaware of their total spending. Most of the times, consumers just ignore the 9 endings rather than do the proper rounding. Even though the cents are seen but they are partially ignored because the brain starts encode information immediately afterwards the left-most digits are read.A theory proposed by Keith Coulter Associate prof of Marketing at Graduate School of Management, Clark University said that the effect can be enhanced provided the cents are printed in a smaller size than the dollar part, so the cents are more likely to be ignored or partially ignored by fast-thinking customers. A common placepoint of the effects psychological impact is that the 9 endings lead consumers to believe that goods are marked at the lowest price possible and that it is the best deal out thither. When they check out, that is when a concept called cognitive dissonance takes effect.In other words, when having to decide surrounded by two conflicting outcomes, people have a tendency to train the one that makes them feel happier about their choice. Ending up with a huge bill, they often defend themselves that its worth the money and what they bought was a good bargain. Also, 9 endings play an i mportant role when it comes to price bands. One cent or one dollar drop can make the price appear in the lower price bands and therefore be seen by more potential customers. For instance, an old car of $1,999 pass on still be placed in $1,000-$2,000 price band though its just a dollar to the next price band.As a result, it can be seen by customers who want cars in the $1,000-$2,000 range, besides the ones who want cars above $2,000. However, the left digit effect has been proved to only work if the left-most digit changes. In other words, consumers become more sensitive to price changes when the one cent drop results the left digit of the prices to change. To clarify the idea, in a small survey which I carried out in south-east campus of Houston Community College with 21 students, when being asked to choose between two pens of $3 and $3. 99, the participants showed no clear preference over which one they like better.However, when the prices were changed to $4 and $3. 99, 17 out o f 21 participants reported that they would choose the second pen because it was cheaper. Although there was a whole dollar difference compare to just one cent after the change in prices, the participants become more sensitive about how much money they spend when the left-most digit changes. When the brain quickly scans the prices, the same left digits will make one think that there is no significant difference between them although it was the right digits that determine the difference.However, if the left digits change, even though the right digits make them just one cent different, the brain automatically defines a big gap between the two prices and therefore lead people to choose the one whose left digit is lower. The research has provided me with an in-depth view of the psychological impact of the left digit effect in pricing strategy. Before conducting the project, all I thought of the 9 endings was that they would make prices seem lower and therefore more appealing to potential customers. However, after doing a deep research on the topic, Ive learned a lot more than I thought I would.Ive learned that the effect originates from humans thought processes itself the brain starts encoding the information immediately before we even finish reading all of the digits, and that the 9 endings dont always work but need an important condition for them to take effect the left digit changes as a result of the one cent or one dollar drop . It excessively amazed me how peoples decision and shopping behavior are influenced and determined by such a small effect without their being aware of it, and how the application of such a little thing can do wonder to businesses.The left digit effect itself is linked with other interesting psychological effects that trigger me to search for more knowledge. Rather than just a surface learning, I was able to go deep into the root of the issue and learn about its true nature. However, I think the most important thing that I was able to l earn from doing this research is how to look at familiar things in a daily routine from a psychological viewpoint and analyze them through that viewpoint.