Odd-Even Pricing

What’s Odd-Even Pricing?

Odd-even pricing is a pricing strategy involving the last digit of a good or service price. Prices ending in an odd amount, for example $1.99 or $78.25, use an odd pricing plan, whereas prices end in an even number, for example $200.00 or 18.50, use an even plan.

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History

The original intention of employing an odd pricing plan, or so the story goes, was to induce the cashier to open the cash register to give change. By pricing a product at $4.75 or 49.95, the cashier would probably have to find access to the shift in the register, which listed the sale. Otherwise, theoretically, the cashier could more readily pocket, say, $5 or $50 without ever having to open the register.

Psychology

It’s been suggested that pricing things just under a whole number, like at $29.95 instead of $30.00, makes the price look like a deal — that clients will concentrate only on the first number and perceive the price to be shut to, in this case, $20 compared to $30. In wider terms, odd pricing indicates a deal versus pricing, which promotes buying.

According to a 1997 study reported in Marketing Bulletin, more than 90 percent of advertised prices at the time ended in an odd numeral. The market has shifted and shoppers are certainly savvier now, but it’s very likely that a vast majority of prices still end in an odd number.

Market Positioning

If buyers do see odd numbered prices as deals, that perception must play into a company’ pricing plan. If the company desires to be viewed as a fantastic price, or a discount retailer, pricing things using an odd pricing plan creates a good deal of sense. And companies that want to be viewed more as an upscale retailer, or using superior services or products, pricing with whole numbers — even amounts — makes more sense.

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Retailer Pricing Schedules

Some retailers use the last digit in their product prices to signify how discounted it was and if it might be discounted further. Target, for instance, has such a pricing program. Resources report it looks like this:

  • Products are discounted in increments from 15% to 30% to 50%, then 70%, and finally, 90 percent
  • Prices end in 8 or 6 will be discounted during the next repricing cycle, which happens about every 2 months
  • Prices ending in 4 weeks, for example $12.94, are closing clearance and Won’t be discounted any Additional

When picking a pricing plan, it appears that moving with a strange price, which leads to a dollar figure and cents, such as $3.95, has the largest effect versus a whole amount, such as $10.00. However, the difference between odd and even pennies makes less of a gap, as when customers are comparing $7.99 and $7.98.

FOB is Shipping Point

What’s FOB is Shipping Point?

FOB is a delivery term that stands for”free on board” If a shipment is designated FOB (the seller’s place ), then the moment the shipment of merchandise leaves the seller’s warehouse, the seller records the sale as complete. The purchaser owns the merchandise en route to its own warehouse and have to pay any delivery fees.

This means that if a pallet of jewellery is damaged or lost in shipment, the buyer must file any claims for reimbursement — not the seller — because the dispatch became the purchaser’s responsibility immediately.

FOB Destination

Needless to say, it is in the buyer’s best interest to have the delivery terms be mentioned as FOB (the purchaser’s place ), or FOB Destination. So if the purchaser is based in Minneapolis, Minnesota, the provisions could read”FOB Minneapolis.” And only when the bought shipment arrives in excellent condition does the buyer take it and consider the things stock in its system. The sale is formally finish at that point.

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Accounting Relevance

While shipping costs are determined by when the buyer takes possession of a specific order of products, a organization’s accounting system is also affected. When a shipment is sent FOB Shipping Point (the seller’s warehouse), then the purchase is concluded when the truck pulls from the vendor’s loading dock and can be noted in the accounting system as such.

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On the flipside, the purchaser must note in its own accounting system which it’s stock on its way. That inventory is currently an asset on the purchaser’s books, although the shipment hasn’t arrived yet.

Other Shipping Terms

While FOB is the most commonly-used transport stage, others include:

  • FAS. Free Alongside, meaning the seller must deliver goods on a boat that pulls up alongside a ship of a particular name, close enough that the boat can use its lifting apparatus to deliver it onboard.
  • FCA. Free Carrier, meaning the vendor is bound to send products to an airport, shipping port, or railroad terminal where the purchaser has an operation and can take delivery there.
  • DES. Delivered Ex Ship, which requires the vendor to send products to a specific delivery port, where the purchaser will take delivery on birth.
  • EXW. Ex Works, which only requires the vendor to get products ready to be sent from its location. The purchaser is responsible for making any arrangements for shipment and for choosing up the goods. This is extremely advantageous for the seller.

As a buyer who’s negotiating with a seller who’s a long distance out of your performance, it’s usually in your best interest to have the vendor be responsible for delivering your cargo as near to your company as possible. Conversely, once you’re selling to an overseas buyer, it’s in your very best interest for the purchaser to become accountable when it leaves your loading dock.

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