strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: November 2, 2012

 
 

Expensive Accessories on a Price Tag: Commas and Cents

How numbers are presented can distort a consumer’s perceptions.

Title: Comma N’ Cents in Pricing: The Effects of Auditory Representation Encoding on Price Magnitude Perceptions (Fee or subscription required)

Authors: Keith S. Coulter (Clark University), Pilsik Choi (Clark University), and Kent B. Monroe (University of Richmond)

Publisher: Journal of Consumer Psychology, vol. 22, no. 3

Date Published: July 2012

Suppose you’re shopping for a laptop computer and have narrowed your options to two similar models. One has a price tag of $1522 and the other is being sold for $1,522.00 — same amount, right? Not exactly, according to this study, which finds that the inclusions of commas and cents in prices can make consumers think certain numbers are bigger than they really are — with the “difference” having a potentially big impact on another set of numbers: sales figures.

For example, most people would read the $1522 price without a comma as “fifteen, twenty-two,” and the price including the comma as “one thousand, five-hundred, twenty-two.” The former takes less time to say and fewer letters to spell out. In short, it can come across as the smaller of the two, contrary to reality.

Prior research has focused on how an advertisement or store display can shape perceptions of prices. Consumers can be subconsciously influenced by a variety of visual cues, including the size of the numbers and letters or an ad’s colors, layout, or use of a spokesperson’s image. These cues can have an impact on consumers’ recollection of the cost and their sense of a product’s “price magnitude” — how large or small they judge the price to be. But little attention has been paid to how the presentation of the numbers themselves, in either written or spoken form, affects how consumers evaluate a price tag.

Using three experiments, the researchers had participants evaluate the price of different products, testing variations of visual and aural presentations.

In the first experiment, 216 members of an online community heard short radio commercials for a fictitious electronics retailer advertising special prices for laptops (costing either $1,493 or $1,584) and flat-screen televisions ($1,362 or $1,645). The prices were pronounced either in terms of thousands (as in “one thousand, four hundred, ninety-three”) or hundreds (“fourteen, ninety-three”). Importantly, the number of syllables was the same for the sets of numbers; whether the laptop cost $1,493 or $1,584, it took nine syllables to articulate the price in terms of thousands and five syllables in terms of hundreds.

After hearing the radio spots, the participants evaluated the retailer’s prices on a 10-point scale, with 10 being the highest. The analysis showed that participants consistently judged a price communicated in thousands as more expensive, relatively, than the same price expressed in hundreds.

The inclusion of cents also had a significant impact on participants’ judgments. Specifically, an increase of less than one-hundredth of 1 percent in the price caused by adding cents led to a nearly 9 percent increase in participants’ perceptions of the new number’s magnitude. The authors note that this is especially interesting because the word cent inherently implies a much smaller amount than the words thousand or hundred when verbalized, so one might expect that adding cents would actually drive down participants’ evaluations of the cost. And yet the opposite occurred.

The second experiment used the same products as the first, but presented the prices both visually and in audio form on computer screens to 192 students. The prices varied but contained the same number of syllables; some had commas, and some also included cents. The participants were told they would see two products and their prices, and to memorize the prices as accurately as possible. As in the first experiment, participants first rated the prices on a 10-point scale, then tried to remember the exact price for each product.

Once again, the analysis showed that prices appeared to be substantially higher when commas and cents were added. An increase of less than $1 resulting from adding cents (or about eight-hundredths of 1 percent) made consumers think that the price was between 5 and 7 percent higher, depending on the dollar amount the students were asked to evaluate. The results also confirmed that once people formed impressions of a higher price magnitude, those perceptions stuck — regardless of whether they remembered the number accurately.

In the final experiment, 166 students were told to imagine that they had just bought a new laptop and had to write a check to pay for it. Four prices were presented visually — $1386; $1,386; $1694; and $1,694. Of the half of the participants who viewed one of the four-digit prices with a comma, 87 percent included the comma on their check, and 81 percent spoke the number in terms of thousands. Of the half of the group who viewed the price without a comma, 68 percent did not include a comma when writing a check, and nearly half spoke the number in terms of hundreds. The results showed that presenting prices in a certain way can have a significant impact on how those prices are later represented by consumers, the authors write.

There are several implications for businesses. Because articulating prices in terms of thousands (using a comma) or including cents will drive up the perceived magnitude of the cost, managers could manipulate how their price tags compare with those of competitors. For example, the manager of a used-car lot could orally or visually advertise his prices in terms of hundreds, driving down the perceived cost in the minds of consumers, while citing the competitor’s prices in terms of thousands (perhaps noting the price in terms of cents, too).

Companies might also want to reexamine their use of pricing strategies that forgo rounding off to higher numbers, such as charging $15.99 instead of an even $16. That approach can be self-defeating, according to this study, because consumers will likely consider the price that includes cents as more, not less, expensive. As the syllabic length of a price increases (by adding commas or cents), so does the time it takes for consumers to evaluate the cost, which can create the subconscious impression that they will be paying more.

One final wrinkle: Because of language limitations, complications arise with bigger prices — those at the $10,000 level and above — making it difficult to apply the researchers’ insights at a new-car dealership, for example. “We avoided use of five-digit prices,” the authors write, “because verbal representation as hundred-products (e.g., $25,834 — ‘two-hundred fifty-eight hundred, thirty-four’) typically does not occur.” Further research may be done on that issue, they suggest. For now, businesses dealing in five-figure prices might do themselves a favor by being as brief as possible and dropping the commas. In other words, offer that car at “twenty-five, eight thirty-four,” and not at “twenty-five thousand, eight hundred, thirty-four.”

Bottom Line:
Including commas and cents in a price tag will increase the perceived magnitude of a product’s cost in the minds of consumers, well beyond any actual spike in price that occurs or even if the price stays the same or decreases. The “comma and cents” effects hold in both visual and auditory mediums, this paper found, meaning companies can attempt to manipulate their competitive pricing through a variety of advertising platforms.

 
Page 1 2  | All
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store