On Numeracy and Pricing
Abstract
Across two laboratory studies, an eye tracking experiment, a facial recognition experiment, and a secondary data analysis, I reveal the unique interaction of numerical processing fluency and consumer numeracy as a significant determinant of consumer response to 99-ending prices. I argue that less numerate individuals create mental analog representations around 99-ending prices’ left digits, whereas highly numerate individuals encode 99-ending prices as their one-cent neighbor, with consumers responding more favorably to prices when they mentally encode them around a fluent number. Specifically, highly numerate individuals respond more favorably when 99-ending prices (e.g., 17.99) border a fluent number (i.e., 18). Conversely, less numerate individuals respond more favorably when 99-ending prices (e.g., 18.99) contain fluent left digits (i.e., 18).
I provide empirical evidence for the effects of this processing difference on liking, purchase intentions, and actual sales. I also obtain evidence for the underlying process using eye tracking technology that reveals that highly numerate individuals fixate more frequently and for longer durations on the right digits of a price than less numerate individuals, and using facial recognition technology that reveals that less numerate individuals exhibit greater fear than highly numerate individuals when processing multi-digit prices. The findings represent a significant contribution to the price processing literature and yield substantial managerial implications.
Citation
Hodges, Brady (2019). On Numeracy and Pricing. Doctoral dissertation, Texas A & M University. Available electronically from https : / /hdl .handle .net /1969 .1 /184955.