Lucky and Unlucky Price Endings
This is an excerpt from my new book Priced to Influence, Sell & Satisfy: Lessons from Behavioral Economics for Pricing Success.
Dutch sociologist Olav Velthuis insightfully observes that “Prices, which have long been considered to be devoid of meaning at all, can be thought of as cultural entities.” Nowhere is this more apparent than when considering symbolic meanings of numbers beyond the functional inferences they provide to customers. Superstitious beliefs about numbers and prices are sometimes far more powerful than the functional signals. These beliefs are often based on how a culture thinks of the significance of particular numbers as either auspicious or inauspicious. Superstitious beliefs play an important role in pricing, especially in which price endings are used and how they are interpreted in a culture. Unlike the United States, where prices ending with 9 are the most common, in many Asian countries, including China, Japan, and Malaysia, the most popular price ending is 8.
In Chinese culture, the number 8 has special importance. It is spoken as bā and sounds similar to fā, which has connotations of wealth, fortune, and prosperity in Cantonese and Mandarin. Because of this resemblance, there is a centuries-old belief that 8 is an auspicious number. This widespread cultural belief manifests in many ways that are relevant to pricing. Chinese couples flocked to get married on 08/08/2008, and service providers offered them wedding packages having prices liberally sprinkled with 8s. Telephone numbers in China usually cost nothing, but the Beijing telephone number 18888888888 sold for approximately $17 million because of its auspicious properties.
On the flip side, the number 4, vocalized as sì, sounds very similar to sǐ, the word for death. It is considered to be an inauspicious number to be avoided. In China, and in other countries such as Malaysia, Taiwan, Singapore, and Hong Kong where Cantonese and Mandarin are spoken by a significant proportion of the population, sellers tend to favor prices ending in 8 and shun those ending in 4.
In one study of Chinese and Taiwanese print advertisements, researchers found almost 40 percent of prices ended with 8, and just 1.4 percent of prices ended with 4. Another study conducted in Singapore found a similar result. 31.1 percent of prices advertised in two Singaporean newspapers ended in 8. The authors concluded that “the lucky price ending 8 can be interpreted as an element of traditional Eastern culture, which communicates a superstitious belief rooted in the Chinese language.” A third study found an over-representation of prices ending in 8 in the room rates of casino hotels in Macau.
The symbolic meanings of numbers and the roles played by the seller in offering a price and by the buyer in accepting or declining it in market transactions have cultural significance. People’s cultural beliefs about numbers play an influential role in how sellers offer prices to customers.
In the United States and other countries, when sellers use the number 9 as the last digit of their prices, they are mainly thinking about how their customers will react psychologically to the price. As we saw earlier in this chapter, charm prices lead a significant number of customers to underestimate the price and also create the perception that the seller is offering a good value. American sellers specifically, and Western sellers in general, use prices to capitalize on these psychological phenomena.
Many Asian sellers have an altogether different worldview when setting prices. Even though the psychological processes associated with 9-ending prices apply to Asian consumers because they are based on general cognitive and perceptual processes, many sellers choose not to focus on customer reactions to price endings or to benefit from them. Instead, they rely on the superstitious and cultural significance of numbers in their pricing decisions. Using the logic that “I want to harness good fortune for my business and my customers with my pricing decisions,” they gravitate towards prices ending with the number 8.
My new book Priced to Influence, Sell & Satisfy introduces the latest science of designing effective pricing strategies using behavioral economics principles. You will learn how customers search for, evaluate, share, and use prices in their buying decisions, how they participate in setting prices, and what managers can do to understand and influence these processes. The power of psychological pricing actions lies in their leverage. Many of them require relatively small investments and produce disproportionately large returns to the business.