Advantages and disadvantages of odd-even pricing
Like any pricing strategy, there are an array of advantages and disadvantages to implementing an odd-even pricing strategy. Of course, these advantages and disadvantages will vary depending on the industry, that is, whether we are talking about SaaS, restaurants, eCommerce, retail pricing, et al.
Let’s start with some potential benefits of odd-even pricing.
1. Motivates impulse buys:
Pricing something like “$9.99” may encourage people to buy without thinking because they'll see it as a low price. Odd pricing often resonates with customers as a discount, so when customers see the odd numbers they may not think too hard about the overall cost of the purchase.
2. Encourages larger purchases:
Since customers feel they are getting a discounted price, they are more likely to buy more. Additionally, ending your prices in odd numbers makes it more difficult for people to add up the total cost. Typically, people will end up estimating and purchasing more.
Some of the not-so-great consequences of odd-even pricing:
1. Damaged LTV and perception:
Customers who are purchasing because they perceive the product as a deal are not great for LTV and retention. Likely, they are one-time buyers and only purchasing because of the perceived discount. However, if your small business operates in retail or another industry that thrives off of one-time sales, then this does not apply. In SaaS, though, you want a pricing strategy that boosts LTV and retention.
2. Incorrect perception of value:
By ending prices in odd numbers, customers may mistake you for a discount retailer or if you choose to discount in even numbers, they perceive you as luxurious. This can be prevented as long as you carefully select the price that fits the value of your product.