Beware the left-digit effect: Price gimmicks may affect choice

Feb 23, 2009

When shopping, we often find ourselves choosing between lower- and higher-cost items. But most people make a choice based on the first digit they see, according to a new study in the Journal of Consumer Research.

"Shoppers pay a disproportionate amount of attention to the leftmost digits in prices and these leftmost digits impact whether a product's price is perceived to be relatively affordable or expensive," write authors Kenneth C. Manning (Colorado State University) and David E. Sprott (Washington State University).

In one experiment, Manning and Sprott asked participants to consider two pens, one priced at $2.00 and the other at $4.00. A penny decrease in the price of either pen lowered the price's leftmost digit. The researcher manipulated the prices and found that when the pens were priced at $2.00 and $3.99, 44 percent of the participants selected the higher-priced pen. But when the pens were priced at $1.99 and $4.00, only 18 percent of the participants chose the higher-priced pen.

"The larger perceived price difference between the pens when they are priced at $1.99 and $4.00 led people to focus on how much they were spending and ultimately resulted in a strong tendency to select the cheaper alternative."

The researchers went on to study the impact of two "round prices" (such as $30.00 and $40.00) and two "just-below prices" ($29.99 and $39.99). "When we showed people these sets of prices, most perceived the two round prices to be more similar to one another than the two just-below prices. Based on the perceived price differences, we predicted that people would focus less on how much they were spending when presented with round prices, and as a result, a relatively large percentage of people would opt for the $40.00 option." The experiment supported their expectation. However, when buying a gift for a very close friend or when a purchase only involves a few dollars, the authors found that rounding or just-below pricing had no impact on choice.

"Consumers should be aware of the subconscious tendency to focus on the leftmost digits of prices and how this tendency might bias their decision-making," write the authors."

More information: Kenneth C. Manning and David E. Sprott. "Price Endings, Left-Digit Effects, and Choice." Journal of Consumer Research: August 2009.

Source: University of Chicago

Explore further: NTU and UNESCO to create mini-lab kits for youths in developing countries

add to favorites email to friend print save as pdf

Related Stories

New policymaking tool for shift to renewable energy

32 minutes ago

Multiple pathways exist to a low greenhouse gas future, all involving increased efficiency and a dramatic shift in energy supply away from fossil fuels. A new tool 'SWITCH' enables policymakers and planners to assess the ...

Recommended for you

Cloning whistle-blower: little change in S. Korea

Oct 24, 2014

The whistle-blower who exposed breakthrough cloning research as a devastating fake says South Korea is still dominated by the values that allowed science fraudster Hwang Woo-suk to become an almost untouchable ...

Color and texture matter most when it comes to tomatoes

Oct 21, 2014

A new study in the Journal of Food Science, published by the Institute of Food Technologists (IFT), evaluated consumers' choice in fresh tomato selection and revealed which characteristics make the red fruit most appealing.

How the lotus got its own administration

Oct 21, 2014

Actually the lotus is a very ordinary plant. Nevertheless, during the Qing dynasty (1644-1911) a complex bureaucratic structure was built up around this plant. The lotus was part of the Imperial Household, ...

User comments : 3

Adjust slider to filter visible comments by rank

Display comments: newest first

ExtraMedium
5 / 5 (1) Feb 23, 2009
Did anyone seriously not know this already? The guy who runs the gas station didn't need a study to tell him that people will "pay attention to the left digit" when he slaps an extra 99 cents at the end of every price tag.
VOR
5 / 5 (1) Feb 24, 2009
yeah seems like common knowledge for 30 yrs or something.
Egnite
not rated yet Apr 24, 2009
Aye shop keepers haven't been giving out pennies for change for decades because they think thier customers like them.