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Odd Pricing Makes Psychological Cents

Home Archived Odd Pricing Makes Psychological Cents

By Mbatjiua Ngavirue

WINDHOEK

Many shoppers in the country are probably fed up with the crazy and often erratic pricing policies of retailers that inexplicably use odd prices such as
N$19.99, N$39.99 or N$99.99.

People ask what is the point of these odd prices since the South African Reserve Bank consigned the one-cent coin circulating in Namibia to history more than a year ago.

The Bank of Namibia (BoN), to its credit, never introduced a Namibian version of the nuisance coin – with the five-cent coin being the lowest denomination Namibian coin.

The SARB’s decision to stop minting the one-cent coin early in 2006 came as a godsend to a country weary of having to carry around piles of coins jingling in their pockets.

Director of Banking Services at the bank of Namibia, Leah Namoloh, says the one-cent coin is still legal tender in Namibia although it is rarely found these days.

When commercial banks deposit one-cent coins with the BoN, the central bank repatriates them to South Africa as part of the process of phasing them out.

The one-cent coin appeared to serve no purpose other than to annoy people by constantly falling out of wallets at inopportune times while standing in supermarket queues.

Overseas visitors are often heard to complain about the unusual number – and variety – of coins they have to carry around in Namibia, which they are not used to doing in their own countries.

It is the fervent wish of many that the five-cent coin might soon go the same way as the one-cent piece – into the dustbin of history – as it has little more than nuisance value these days.

The question is, why do local retailers still continue to use prices requiring them to give one cent change, when they have no one-cent coins to give.
When asked why, they use this pricing model; most retailers become coy and hedge around the subject.

After speaking to several big retailers, it soon became clear that it really boils down to a question of psychology.

To put it more bluntly, retailers try to fool consumers into believing that they are paying a lower price, although most of them try to avoid openly stating it in those terms unless pressed hard.

Terence Harty, Managing Director of the Model Pick ‘n Pay Group, however, openly admitted that these pri-cing tactics are based on human psychology.

“It is generally accepted that psychological pricing has psychological impact that drives demand greater. Thus, retail prices are often expressed in odd prices such as N$2.99,” he said.

Harty says that Model Pick ‘n Pay’s pricing policy is that at the end of the sale the total is rounded down, and not up as some retailers do, with prices such as N$ 2.99 therefore becoming N$2.95.

He added that this rounding down involved a cost for the Model Pick ‘n Pay Group amounting to N$124??????’??