a new pricing policy
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Adapted from AdPrin.com
A new pricing policy
Long-term versus short-term thinking
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Adapted from AdPrin.com 2
A new pricing policy
You are a retailer. You learn about a new pricing policy “P-plan” that you could implement at virtually no cost and the effects on long-term sales would be negligible. 1. Customers say they believe the P-plan is more honest.
2. It would save time and reduce confusion for customers and retail clerks.
3. It would improve your image as a quality retailer.
Should you adopt this new pricing policy?___ YES ____ NO ___NOT SURE
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Adapted from AdPrin.com 3
The plan might increase very short-term profit, but reduce long-term profits.
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Use round prices (1.4.2)
This will build long-term relationships.
Of customers, 66% prefer even prices, and 13% prefer odd.
Odd prices take 1/3 time longer to think about and even university students are led to substantial errors.
Round prices imply higher quality: Kmart uses odd prices on 99% of its items while Nieman Marcus uses it on 16% (Persuasive Advertising p 44)
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Should the Bose Wave Radio have a round price?
See the next slide for the answer.
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Adapted from AdPrin.com 6
Yes, Bose is a high-quality product. Round prices are associated with better quality perceptions for restaurants and other high-end products (Schindler and Wiman 1989 in Persuasive Advertising p 45).
See AdPrin.com for more information.
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Adapted from AdPrin.com
Based on this exercise, write a small application step for yourself, and set a deadline, preferably within one week. If you are working with someone else, share your application plan and the results of your application.
• For example, think about your objectives. If you only need to success in the short term, odd pricing has been found to increase sales in the short term (Persuasive Advertising p 44). If you would like to emphasize quality, use round prices.