Odd-Even Pricing

When I was younger, I could always remember watching cartoons on Saturday morning, when suddenly I saw a brand new product come on TV.  Most of the time, the commercial was lead by the great Billy Mays, enthusiastically explaining to me why I should buy this product.

I would get entranced into these commercials and wait for the punch line.  Most of the time it was, “And you can have this for not $40, not $30, not even $25, but for only $19.95.” 

Then as I became a little bit older I began see different commercials, or paid TV programs that would have the same enthusiastic promoter, with a co-host that couldn’t believe what the product could do.  After about a five to eight minute discussion and demonstration, the punch line would come.  “You can have all of this for just 5 easy payment of $19.99.” 

I never quite understood why companies and promoters changed their tactic, but know I understand.  These companies were participating in odd-even pricing.  For many consumers, it is easier to buy a product that is under a certain amount.  This is true even if the product is just $0.01 under, or $0.05 under.  Many people can relate to not spending $20 on something, but $19.99, oh that is not a problem.