The left-digit bias: When and why are consumers penny wise and pound foolish?
Sokolova,Tatiana Seenivasan,Satheesh Thomas,Manoj
Sokolova,Tatiana
Seenivasan,Satheesh
Thomas,Manoj
Abstract
Consumers’ price evaluations are influenced by the left-digit bias, wherein consumers judge the difference between $4.00 and $2.99 to be larger than that between $4.01 and $3.00, even though the numeric differences are identical. This research examines when and why consumers are more likely to fall prey to the left-digit bias. The authors propose that the left-digit bias is stronger in stimulus-based price evaluations, wherein people see the focal price and the reference price side by side, and weaker in memory-based price evaluations, wherein people have to retrieve at least one price from memory. This is because in stimulus-based price evaluations, people tend to rely on perceptual representations of prices without rounding them. In memory-based price evaluations, they rely more on conceptual representations, which makes them more likely to round the prices. Results from six studies—five experiments and a scanner panel study—support the hypothesis that the left-digit bias is stronger in stimulus-based evaluations. These results inform managers about when to use left-digit pricing and characterize fundamental differences between stimulus-based and memory-based evaluations.
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Date
2020-08
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Research Projects
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Keywords
left-digit bias, memory-based evaluations, numerical cognition, price evaluations, reference prices
Citation
Sokolova, T, Seenivasan, S & Thomas, M 2020, 'The left-digit bias : When and why are consumers penny wise and pound foolish?', Journal of Marketing Research, vol. 57, no. 4, pp. 771-788. https://doi.org/10.1177/0022243720932532