“ALEXANDRU IOAN CUZA” UNIVERSITY OF IA ȘI FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION Field of Study : Busines s Administration ESTIMATION OF… [600641]

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“ALEXANDRU IOAN CUZA” UNIVERSITY OF IA ȘI
FACULTY OF ECONOMICS AND BUSINESS
ADMINISTRATION

Field of Study : Busines s Administration

ESTIMATION OF
PSYCHOLOGICAL PRICE IN
MARKETING

Scientific Coordinator Graduate
Prof. Dr. Adriana ZAIȚ Mădălina LUCHI AN

IAȘI
2016

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TABLE OF CONTENTS
List of Tables ………………………….. ………………………….. ………………………….. ………………….. 5
List of Figures ………………………….. ………………………….. ………………………….. …………………. 5
Introduction ………………………….. ………………………….. ………………………….. ………………………… 7
I. Literature Review ………………………….. ………………………….. ………………………….. ……….. 10
1. Price and consumer perceptions ………………………….. ………………………….. …………….. 10
2. Psychological pricing: odd even prices and thresholds ………………………….. ………….. 14
3. Psychological pricing: other principles and practices ………………………….. ……………. 20
II. Empirical Analysis ………………………….. ………………………….. ………………………….. ……… 25
1. Research Context: Background – PC Market ………………………….. ……………………….. 25
2. Research Objective ………………………….. ………………………….. ………………………….. ….. 29
3. Research Methodology ………………………….. ………………………….. …………………………. 32
3.1 Sample and Data Collection ………………………….. ………………………….. ……………….. 32
3.2. Design and Measu rements ………………………….. ………………………….. …………………. 33
4. Results and Discussions ………………………….. ………………………….. ……………………….. 36
4.1. Price interest and sensitivity ………………………….. ………………………….. ………………. 36
4.2. Estimation of psychological price ………………………….. ………………………….. ………. 39
4.3. Effectiveness of psychological pricing strategies on the consumers’ preferences . 42
5. Research conclusions ………………………….. ………………………….. ………………………….. . 46
6. Limitations and Future Research ………………………….. ………………………….. ……………. 48
Annex 1 – Questionnaire ………………………….. ………………………….. ………………………….. … 50
Annex 2 – One Way ANOVA ………………………….. ………………………….. ……………………… 53
References ………………………….. ………………………….. ………………………….. ………………………… 54

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LIST OF TABLES

Table 2. 1. 1. Shipments of PCs Worldwide 2011 – 2014 ………………………….. ………………………….. .. 26
Table 2. 1. 2. TOP 5 Vendors in the International PC Market (2015) ………………………….. …………….. 27
Table 2. 2. 1. Psychological pricing: Strategies, Effects and Causes .……………………………….. 30
Table 2. 3. 1. Laptop prices across different Romanian distributors ………………………………… 34
Table 2. 4. 1. Values for Maximum/Minimum Stated Preference Surv ey…………………………… 39
Table 2. 4. 2. Frequency – WTP Stated Preference Survey ………………………….. ………………………….. . 40
Table 2. 4. 3. Sample Distribution – Odd Even Price Endings ………………………….. ………………………. 40
Table 2. 4. 4. Chi Square – Product Bundling ………………………….. ………………………….. …………………. 44

LIST OF FIGURES

Figure 2. 3. 1. Study Cycles – Sample Distribution ………………………….. ………………………….. …………. 32
Figure 2. 3. 2. Age Distribution of the survey sample ………………………….. ………………………….. …….. 33
Figure 2. 3. 3 Gender Distribution of the survey sample ………………………….. ………………………….. ….. 33
Figure 2. 3. 4. Odd – Even Pricing Survey – Product Profiles ………………………….. ………………………… 50
Figure 2. 3. 5. Product Bundling Survey – Product Profiles ………………………….. ………………………….. 51
Figure 2. 4. 1. Price interest – Preference regarding acquiring information on market options when
making a purchasing decision ……………………………………………………………………….. 36
Figure 2. 4. 2. Price interest – Investing time in finding the lowest prices is not worth the effo rt….. 37
Figure 2. 4. 3. Means Plots – One Way ANOVA: Income Levels ………………………….. ………………….. 38
Figure 2. 4. 4. Odd – Even Pricing Sample Preferences Distribution ………………………….. ……………… 42
Figure 2. 4. 5. Product Bundling Sample Preferences Distribution ………………………….. ………………… 43
Figure 2. 4. 6. Sample Distribution – Product Bundling Strategy Sensitivity ………………………….. …… 44

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INTRODUCTION

The aim of this study was to investigate how consumers of goods with a high utlity and a
high cost (a laptop) perceive odd and even prices, product bundling strategies and to find an estimate
of their internal reference price regarding this product. As odd prices are usually associated with fast
moving consumer goods and even pric es are mainly associated with high ut ility luxurious products,
this research provides insight on how consumers’ preferences are influenced by odd even pricing
when considering a medium to highly priced product. A laptop cannot be considered a low cost item ,
but it is also not necessarily part of the luxurious items category.
Pricing strategies centred around the consumers’ preferences have long since been proven to
provide immense value for a producer and be the most rewarding from a profit point of view.
Profitability of pricing decisions can be increased through the use of psychological principles and
they are often employed by marketers and managers alike. One of the main aims of psychological
pricing strategies is to take advantage of the fact that consu mers are highly susceptible to external
stimuli during their decision making process. The consumers ’ own observations of their behaviour
are often not in accordance with their exhibited behaviour. Even though a customer may characterize
themselves as highl y price conscious – which is certainly a more often occurring trend in nowadays’
global economy – when faced with an array of choices in their purchasing process, consumers often
purchase products that a re higher in costs than others, thus violating ration al aspects of the decision
making process.
Odd even pricing is one of the most often occuring psychological practices in the market, its
use spanning across several industries and several product categories (from fast moving consumer
goods to home electron ic products). The main advantage of this strategy is that individuals tend to
read prices from left to right and round prices down, thus registering the prices as being lower than
their actual value. Consumers are also prone to associating this type of pri ces with discounts and
lower priced items, and by default assign a lower quality to the product. Even prices are usually
found at the other end of the spectrum, associated with more luxurious products (jewelry, real estate).
When examining the pricing stra tegies employed for a product with a higher utility and a
higher overall cost such as home el ectronics (laptop in the case of this study) it is necessary to
introduce more psychological practices into the strategy mix. Among the strategies existent on the
market and those examined in previous research studies, prevalent ones are comparative pricing,
BOGO, scarcity and product bundling strategies. Though all of them have their respective studied
effects and advantages, for the purpose of this study the chose n strategy was product bundling. The

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main reason for this is its prevalence in the markets for smartphones, tablets and portable computers.
The main effects are that with this trategy , consumers tend to register higher savings when
purchasing discounted bu ndled products rather than when purchasing discounted single unit
products.
According to the IDC Worldwide Quarterly PC Tracker , the PC market has been facing
many challenges from as far back as 2011, when the market registered a year-on-year decline of
19.5% in total ship ments wor ldwide, and the trend only continued until 2015, when the PC market
registered its lowest value in total shipments since 2008. The reasoning behind this phenomena is
that there is great competition offered by the smartphone and ta blet markets, and the constant
advances in technology drive s prices upwards. Moreover , the recent social and political disruptions
that arose at a global scale also had many implications in creating negative prospects for the market.
Lastly , lowcost PCs an d Windows XP promotions have been ended with the launch of Windows 10,
and the market is taking some time to respond to these changes. Even though it is estimated that sales
will pick up again towards the end of 2016, currently users have stopped making ne w purchases and
are waiting for the prices to reach a more accceptable level before deciding to buy a new laptop. The
context created by low sales due to high priced PCs with an increased utlity due to technological
advances is perfect for examining the role of ps ychological pricing strategies in influenc ing
consumers to perceive the price of a laptop as smaller than it really is.
As such, the main purpose of the rese arch study was to examine the p references of young
adults pursuing a higher education deg ree in the Faculty of Economics and Business Administration
as they represent one important target segment of the PC m arket – young future professionals . By
focusing o n a notebook with technical specifications that gave it a medium to high quality and a
corresponding price , the research conducted aimed to analyze the effects of odd even pr icing
practices and product bundling strategies have on the consumers ’ preferences. In addition, one main
objective was to estimate the consumers’ internal reference price of a medium to high quality laptop.
The survey consisted of three main parts: the first one estimated the consumers’ willingness
to pay through stated preferences; the second one focused on the effectiveness of odd even pricing
and product bundling strat egies through an indirect approach (the respondents were not made aware
of the intentions to study price endings, but were in turn asked to choose among 2 different product
profiles) and lastly, the third part consisted of a more extensive questionnaire us ing a Likert scale
that was aimed at measuring the price interest and sensitivity of the respondents.
The results of the research showed that the sample was highly price sensitive and had an
interest in price even in the case of bundled products, where the majority of the sample stated that
they compute individual prices of the products in a bundle before comparing them to the bundled
price. This high price awareness could be attributed to the fact that students are generally
characterized by low financial resources ( and price sensitivity is higher for respondents with lower

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incomes). Likewise, this price s ensitivity could be attributed to the fact that the sample was
composed of students in economic fields, where they may gain enough knowledge of market
practices to become desensitized to pricing strategies.
The willingness to pay of the consumers’ was estimated to be 1707.5 RON for a medium to
high quality laptop, which is significantly lower than the market prices of laptops with a similar
quality. This un derstated price could be attributed to the fact that there was no incentive for the
respondents to reveal their true preferences . It could also be a bi -product of the price sensitivity
which stems from limited financial resources that characterizes the sam ple. Additionally , the research
results outlined the fact that respondents displayed an affinity for even prices in their stated
preferences . However, this result contrasts with the findings resulted from examining odd even
pricing strategies and consumer preferences, which show that two thirds of the sample chose a
product with an odd price . This discrepancy is in line with most results the literature has to offer,
which show that in general cosnumers have an inherent preference for even prices due to ease of
remebering and processing them while , in real market practices, most consumers tend to migrate
towards products wi th odd prices due to th e fact that they register a lower cost for an optimal value.
The effectiveness of product bundling strategies is al so high for young adults purchasing a
degree in higher education. Research results show that even though consumers characterized
themselves as being desensitized to multiple unit pricing, the majority of the respondents chose a
bundled product with a highe r price over a discounted single unit product with a lower price. These
findings also corroborate the idea that consumers ’ assessment of their own behaviour is not in
accordance with their exhibited behaviour.
The main limitations during this study arose f rom the fact that the willingnes s to pay
measures were conducted in a hypothetical manner and not in a real market place environment;
therefore there is no guarantee that the observed preferences of the consumers will translate into real
life purchasing be haviour. Furthermore, the analysis on the effectiveness of odd even pricing
practices and product bundling strategies, did not take into consideration the effects that other
attributes presented in product profiles had on the decision making process of the sample. Even
though the price interest measures awarded a certain level of security regarding the importance of
price when making purchasing decisions, it would be more accurate that in future research a conjoint
analysis is performed. This type of analys is allows the researcher to measure the respondents’
preferences by ranking the product attributes via systematical variations and analyze their
contributing worth for each repsondent via part worth utilities.

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I. LITERATURE REVIEW

1. PRICE AND CONSUMER PE RCEPTIONS

Pricing as one of the most important driver of profits is often not a primary concern for a
surprising amount of corporation executives. Research shows that there is an estimate of 5% of
companies that can boast of an appointed „chief pricing offic er” (Hinterhuber & Liozu, 2014). Even
more daunting seems to be the fact that for every such company, there are dozens more – such as
Volkswagen, Nestle, Sony, Toshiba – that do not have a delegated employee specialized in such an
important part of a produ ct’s sucess and consequently, of the company’s. That is, however, not to say
that not enough emphasis is put on pricing strategies but rather that the attention is m isplaced and the
effort misguided in many situations. For most companies, the estimation of a price begins with the
sales department (through negotiating with customers), passes through finance and marketing to key
– account management and as such the responsibility of pricing is split between many decision
makers. Therefore, researchers argue t hat in reality, in such cases the res ponsibility falls onto no one
(Hinterhuber, 2016 , pg. 71 ). In an effort to find which principles are sound when using to them to
decide pricing strategies, and which principles are driven by myth, a study outlines some of the most
important misconceptions regarding criteria used for price setting and how they can be overcome.
One of the relevant conclusions that arose from this study1 is that companies can often overcome
mistakes in their pricing methods by switching fro m traditional strategies (cost – or competition –
based pricing) to value – based pricing (Hinterhuber 2016) . By centring the company’s focus on the
customer and the val ue they pose and perceive, research further shows positive effects. One success
story i s Hugo Boss, a firm which generated over €1.5 billion annually in sales through traditional
methods , but has managed to further improve their profits and sales ( Hinterhuber, 2016, pg. 74) by
moving on to a value – based strategy . While cost – based pricing approaches offer a sense of
security, th ey are also accompa nied by lower profitability, whereas pricing strategies centred on the
customer and their perceptions of value, bring the most profitability. However this is a practice that
only a few, cutting edge corporations and enterprises can affor d to implement.
When centring a strategy on the customers, a key aspect is to accurately assess the
customers’ behaviour as opposed to their perceptions of their own behaviour . A good example comes
from a widely cited study which observed and recorded supe rmarket shoppers’ level of awareness of

1 Hinterhuber A., (2016) The six pricing myths that kill profits Business Horizons, Volume 59, Issue 1, pg. 71 – 83;

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their own shopping habits (Dickson & Sawyer, 1990). The study appraised that 50% of the
participants could not accurately remember the prices of the products they purchased and those that
selected an item on sale wer e not aware of the fact that there was a discount. On the other hand,
customers that have a fair amount of price knowledge, the occurrence of discounts and actively visit
retailers based on ly on these characteristics, make up an estimate of 2% of the custo mer pool
(Hinterhuber, 2016, pg. 76 ). These findings are not in accordance with the testimonies of the
respondents, the majority of which state that price is one of the most important factors when making
a purchase decision, if not the top criteria. When analysing this disparity between the observed
behaviour of the consumers and the behaviour they believe they exhibit, it would not be a stretch to
assume that while consumers do in fact have their own criteria based on financial or other personal
needs, the y are susceptible to many other stimuli from their environment (internal or external) that
easily influence their decision making capabilities and in turn lower their price sensitivity and
awareness.
Impressionable customers are a staple of the 21st centur y, or more specifically the
Information Age. By having access to such a wide variety of sources and channels of information it
is incredibly difficult for an individual to develop a “filter” so that their decision making process
remains true to satisfying only immediate personal needs and not derives to purchasing in excess,
otherwise identified as consumerism. This fact has posed an increasing challenge and opportunity to
marketers and managers. They have recognized that the easiest way to deal with this t ype of
customers is through partitioning them in segments, each with their own needs and preferences, a
fact acknowledged by the academics from the 1960’s (Weir, 1960). Studies with an array of
companies show that regardless of provenance and the environme nt in which they currently reside in,
there are few individuals who purchase purely based on price criteria (less than 30% – Hinterhuber,
2016 , pg. 76 ). When purchasing a product or a service many expect an array of other benefits which
can vary based on t he product and corresponding target segment (convenience, expertise, speed,
quality, customization , implementation etc.) and the challenge is to label a product with a price
accurate enough to convince the customer that the package they are acquiring refle cts all the desired
characteristics. Likewise, products need not be treated as simple commodities, but be customized as
to appeal to different segments of the markets they are trying to break in. The customization of the
product can otherwise be called dif ferentiation – the aspect through which a brand or a company
chooses to stand out in the eyes of the customer. As showcased in previous examples, the perceptions
of the customer do not always accurately relay what their eyes observe. Even with differentiat ion,
there have been many recorded cases which prove that a customer’s perceptions are key. Even
though on a technical or industrial basis the differentiation of a product can be minimal if not
irrelevant, such as based only on the font design of the name on the packaging , the customer can
change all their shopping behaviour based on that minimal difference.

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As summarized until now, price can be one of the most important drivers of profitability in a
company, a fact which is often not exploited to its maxi mum potential. Many companies choose to
exact a cost – based or traditional pricing strategy , foregoing higher profitability in exchange of
security. Using a value – based strategy an d centring all the activities o f the company on the
customer, their needs and perceptions, has been proven to be a strategy which renders the highest
profits. Though there are many perceived risks by managers when it comes to adopting customer
valuation strategies, there also many benefits and strengths to take advantage of. Th ere is great
discrepancy between the customer’s perceived behaviour and their actual behaviour , which coupled
with after – effects of the information age leave significant space for apparently important, though
not always necessary , needs to occur. Hence t here are many arising opportunities for segment
creation and product differentiation. Though there many ways to differentiate a brand or a product on
a market, the price can play a significant role if employed through the right strategy and
psychological p ricing represents one approach through which marketers address these small gaps or
weaknesses that customers’ perceptions offer. As such, pricing tactics and principles may be
employed by suppliers and retailers to influence the perceptions and decision ma king process of
purchasing of the customers in the firm’s favour , often times without having to make major changes
to the price itself.
The research conducted on behavioural and psychological elements that influence pricing
and the decision making process of creating or selecting a pricing strategy is mainly focused on
violations of irrationality. This concept refers to instances or circumstances in which a customer’s
purchase decision is not in accordance with logical reasoning. Further research focuses on the role
psychological pricing strategies play in regards to economic theory. The law of demand (consumers
demanding more of a good the lower the price is) is regarded by most economists as one of the most
important empirical discoveries in economics (Ahm etoglu, 2014). It has been assumed that purchase
decisions are guided by the utility vs cost characteristics of a product and consumers have clear and
stable preferences when they are exposed to complete information, and will select the one with the
highes t overall value at an optimal cost. However , research on consumer decision making has
discovered that customers are incredibly susceptible to environmental stimuli, and studies have
shown that an individual can prompted to buy a higher quantity of a produc t even though there is no
rational reas on to do so or that sales can increase when placing a „Sale!” sign on an item without
having to change the price (Inman et al, 1990). The belief that a consumer does not make purchases
based on performed evaluations of product price features and alternatives but rather based on mental
heuristics has many marketing implications. Specially, the emphasis is put on the discoveries that
suggest that external cues and factors, contextual stimuli and price presentation have a significant
impact on a consumers judgement.

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Nowadays, using pricing practices in order to achieve significant differentiation of an
offered product line is becoming more and more challenging. Due to the broadening of markets and
increasing amount of comp etition, especially in the retail sector, detecting considerable differences in
competitors’ offers on products like toothpaste or gum is becoming increasingly difficult (Sigurdsson
et al. 2010). Furthermore, consumers are also becoming aware of pricing pr actices enabled by
suppliers therefore rendering them trivial. Therefore, as price itself is losing importance as a factor,
the manner in which the price is communicated (‘design’ and placement) is gaining more grounds
(Ahmetoglu et al, 2014, pg. 696). Characteristics of the price that can communicate information can
include but are not limited to font, placement (high vs low), vowels or consonants, last digits and
their combinations with stimuli from other sources (time lines, holidays, scarcity). The will ingness to
pay of the customer can be affected negatively by a discount, if for example the discount is lowered
just a short amount of time after the buyer has made a purchase (Wang & Krishna, 2012). An
important factor in price perceptions seems to be the usage of characteristics of prices that are
congruent with the magnitude of the price. The packaging can also be a factor that greatly influences
a consumer’s perception of a product and its value as opposed to the price. For example, heavier
wine bottle s are associated with higher prices ( Piqueras -Fiszman & Spence, 2012) . The relationship
between price, placement and products can further alter the customers preferences to lean towards
high quality items if there is a wider variety of items presented in t he same environment, at the same
time. Bertini, Wathieu and Iyengar (2012) found that willingness – to – pay increased for higher
quality items and decreased for lower quality ones, when there was a great variety of low and high
quality products to choose from which allowed customers to make comparisons of the utility vs cost
aspects of each item (Larson, 2015).
Psychological price is an important strategy that has extensively been used by retailers,
especially in the past couple of decades, a trend that s eems to be effective according to sales reports
of many retailers across the globe that outline a positive response from consumers in regards to
prices with an odd ending. Rather than assuming that this pricing strategy focuses on numbers, it is
more accur ate to say that the main goal of such tactics is to make a play on the consumers’
perceptions. The perceptions of the consumers regarding price depends on many variables, as the
more information a buyer is exposed to, the more complex the decision making p rocess becomes and
the more needs the pricing strategy has to respond to. The consumer’s perceived value can be
influenced by the qua lity or quantity of the product or whether or not the product or serv ice is
bundled with other items. Furthermore, the pric ing strategy does not only need to find a balance
between the consumer’s needs and perceptions and the characteristics of t he product that respond to
them; it is necessary for the product to be accompanied by the right placement and distribution
programs, promotional campaigns (discounts or effective branding).

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2. PSYCHOLOGICAL P RICING : ODD EVEN PRICES AND THRESHOLD S

Psychological pricing refers to strategies employed by companies to appeal to the emotional
side of the customers rather than their rationa le. Companies aim to increase their profits through
minimizing their reduction of prices and maximizing sales prospects by introducing behavioural and
psychological aspects of the consumer into the mix. The most common practice in the marketplace is
the od d even psychological pricing strategy, otherwise stated in literature as charm prices, magic
prices, psychological prices and 9 – ending prices. This practice i s such a common occurence that
some researchers have begun to argue its effectiveness is general ly taken for granted, and used
mostly due to tradition and not actual positive effects, which could have damaging effects such as
price rigidity (Balaji, Raghavan, 2007) . However, most literature is composed of studies in varying
industries and across diff erent product categories that showcase the effectiveness of odd even pricing
strategies. One example could be Harris and Bray (2007) wh ose study revealed that 64% of the UK
prices ended in the digit 9; Fried mann (1976) found that the most common price endi ng was the digit
9, fol lowed by 5; retail shops in west ern economies (Schindler 2001; Gueguen and Legohorel, 2004)
were found to display similar trends. Regardless of decade or economy it is clear that an effective
strategy in the retailing sector is posed by the odd even pricing strategy. Furthermore studies also
show an immediate associatio n between odd and even prices and level of quality, depending on price
level, market segment and product category. N umber digit combination like 95, 99 and 00 are the
predominant price endings used by companies. Specifi cally, 00 is used by high -priced, high -quality,
or upscale fi rms; whereas 95 is used by mid -priced or average quality firms; and 99 tends to be used
extensively by low -priced, low -end firms or fi rms promot ing a high -value image (Asamoah,
Chovancova 2011, pg. 31).
When invoking the concept of psychological pricing the main name that comes to mind is
the 9 – ending prices. This strategy refers to the practice of sellers, retailers or otherwise, of setting
the rightmost digit of a given price to 9 (ex.: 2.99, 2.59, 289). It is assumed that there exists a price
threshold between the prices ending in 0 and those ending in 9. The main reasoning behind this
strategy stands on behavioral observations of the customer s. Some assumptions are that in general ,
consumers tend to round prices down and read them from left to right. In such cases, when seeing the
price 2.79 a consumer might register the value as closer to 2.00 rather than 3.00 units. Such effects
are known as level or underestimation effects . Furthermore, uneven numbers as ending prices tend to

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force customers to associate those prices with discounts, as opposed to even numbered prices, such
as 10.00. There could be however some negative effects , such as the quality – image effect as
theorized by W inner (1997) which causes clients to associate an inf erior quality to items with 9 –
ending prices attached (Gedenk, Sattler 1999).
The practice of ending prices with the digit 9 is a n issue that has attracted much at tention
starting from as far back as 1932 when the discution was initiated by Bader and Weinland, and
empirical studies are still made and results analyzed as to confirm whether or not the assumption s of
this theory are holding true. The studies have conti nued to show that in many cases, depending on
product category, sales increase when items have attached a 9 – ending price. There have been
discovered some negative effects to this theory such as the fact 9 – ending prices are typically
associated with ite ms of an inferior quality or small priced items, like grocery products. One
explanation for this could be the fact that t ypically, as the level of the price grow s, so will the price
sensitivity of the customer. Therefore, the c oncept of a price th reshold i s invoked to measure the
effectiveness of this strategy. A price threshold, from an economic point of view, is a psychological
„line” or fixed point that represents the limit the customer has to reach to lose his willingnes to pay
for a product. If a suppl ier goes past that point it is very possible that they will lose a big portion of
the target segment. However, that is not to say that suppliers absolutely cannot increase the prices. It
is possible if strategized in the right way.
Assume that a firm’s ma in product is a pack of gum , which belongs to a category of goods
that in general tend to have lower prices, for example 0. 59 units , and all the other supplier s in this
product category have set similars prices of 0. 39 or 0 .79. Therefore, it would be right to assume that
most of the customers threshold when it comes to gum packs reside s in the 0.x9 area of the price.
Said supplier, is in dire need of an increase in profitability, but he is well aware that in raising the
price of his product he risks losing his customers to the competing brands on the market. Still, it
would not be a drastic measure for this fir m to increase the price from 0.59 units to 0.8 9. The reason
for this is that a buyer generally does not tend to calculate in cents or percentages, the refore when it
comes to fast moving consumer goods it is less likely for the customer to notice an increase of almost
50% in the price. Even so, those that do notice such changes in price are estimated by studies to
make up a small percent of the customer pool (~2% as mentioned in the previous chapter), therefore
it is possible for the firm to make up for that relatively small loss in customers with the profits gained
from the remaining clients, by increasing the revenue per buyer .
While moving from 0.59 t o 0.8 9 may not result in a drastic change in the target segment for
the product, moving from 0.99 to 1.0 9 may in fact deter a great proportion of customer s from making
a purchase . The reason for this is that in general, the price threshold exists between t he left – most
digits of a price: jumping from 0 to 1 units or from 1 to 2 units is more obvious , as opposed to
jumping in the same 0 – range of the price (0.59 – 0.99, 1.09 to 1.39). Thus it can be assumed that

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price thresholds have to be considered at a small interval whithin a pri ce level (Gedenk, Sattler 1999,
pg. 51). As exemplified above, an increase in cents can be tolerated, but an increase in one full unit
(such as one dollar or one euro or one leu) can become a decisive point in whether or not a c ustomer
is going to make a purchase. But whether or not this holds true across all types of itmes depends on
the price level. For fast moving consumer goods with prices composed of one digit on the left side
increases in cents can go by unnoticed, especial ly when the rightmost digit of the price is 9, as it
compells customers to round down to the nearest leftmost digit. For goods with a higher price, such
as between 10 to 99 units, the price level is higher therefore the threshold is also raised, so it has been
assume d that increases of 1 unit ( €1 or $1 or RON 1 ) can also go unnoticed. Generally speaking, if
the price level grows, so does the interval in which the price threshold can be found. As such,
customers are still likely to buy the same product, if the price is increased from 1.39 units t o 1.59
units, or from 15.59 to 16.39 units, or from 95 to 99 units. In the last case the interval has grown
higher, because both prices are estimated by the customer as being lower than 100 units, therefore a 4
unit increase is much smaller by comparison.
With larger sums, in the 100 – unit interval, this theory can still be applied but there are
many more characteri stics app earing in the mix of differentiating by price. Consumers can still be
compelled to see a price of $249 as smaller than $250 but not n ecessarily in the case of comparing
$249 to $299. In such a case, a customer is much more likely to consider characteristics such as the
quality or durability of the product rather than only the price itself, therefore simply relying on the 9
– ending pric e strategy is not sufficient as a psychological tactic in enlarging the customer base of a
product. However, certain exceptions can be taken into account . One other tactic, l argely used by
companies that sell products in a higher range of prices (electroni cs or fashion goods) can sway a
customer to purchase an item with a slightly higher price than initially desired. When talking about
higher priced items, many customers take into account every characteristic of the product (electronic
goods: PCs, tablets, smartphones can be considered from the point of view of the storage capacity,
durability, battery ) proportional to the price they have. Therefore, enabling the customer to see as
the characterictics of the product worth the price they are assigned is cru cial. This feat can be
achieved through outstanding standards reserved by a company or through oustanding branding of a
product or it can achieved by comparing products.
Assume that the head of one medium income household has decided to purchase a new
laptop; but they have a fixed budget towards this purpose and they plan to buy a product that has
better specifications than the one currently owned. The most they would be willing to pay is $ 300.
Using all resources available at their disposal (pamphlets, ma gazines, online sites) they have noticed
that with this budget they will be capable of purchasing an item of a quality lower than the one
preferred or equal to the one they already have. However, one brand name X, on their official site has
side by side tw o different versions of laptops from the same line of products. The first one, X 1.1 is

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priced at $299 with specifications that overall result in the same quality as the item that they already
own. The second one, X 1.2, has characteristics that set the qual ity higher and at the discounted price
of $329. In this case, unless the customer is completely restricted by their financial capabilities, they
would be willing to go over their initial budget , because the online site of the brand is forcing him to
compar e two versions of the desired product, one good and one exceptionally good, for an increase in
price of only $30 which seems considerably unimportant when comparing to the overall budget of
the individual: $300. Such a tactic is called “Comparative pricing ” and it is heavily employed in the
case of products in a higher range of prices, most notably electronics.
Different companies employ different tactic s to compell the customer into buying a higher
priced item. As the theory suggests, consumers can registe r 9 – ending prices as indication of a
discount . Therefore , when considering image – effects of 9 – ending prices, one can assume that a
customer can be compelled to choose a product worth $299 over a product priced $ 259, because the
former was dicounted f rom $330 to $299. Likewise, there have been studies to analyze the
preference towards round digit endings of a price or even pricing. Clustering around price endings of
0 has been observed in markets for gold, stocks, foreign currencies, real estate, bond futures and oil
futures2, however there seems to not be a wide array of studies to prove the consumers’ prefe rence
towards even prices, as t here is a greater prevalence of 9 ending rather than 0 ending prices in retail
(Nguyen, Heeler, & Taran, 2007 ) .
Round or even number preference is considered for prices ending with .00. In the case of
prices ending with .50 or 500, the prices are considered semi round: less round than those ending
only with 0s but still more round than those ending x0, where x can tak e on the value of digit s any
other than 0 and 5. Studies have shown that consumers may exhibit a preference towards even prices
due to convenience and ease of remembering them, process them and performing mathematical
operations ( Lynn, 2013 ). Due to these characteristics, researchers argue that there should an implicit
preference towards round numbers because of a tendency to like and be more susceptible to familiar
stimuli rather than unfamiliar ones. Diller & Brielmaier have found out in a study performed in 1995
that 66% of consumers agree with the statement „Generally I prefer even prices”. Another study,
(Guido & Peluso, 2004) have also found that people rated their liking for examples of round prices
higher than for even ones. But as discussed in earli er chapters, self assessed images of the consumers
are subject to demand management and may be weak predictors of behavior because they may be
subject to uncouncious preferences. Most studies performed on consumers’ preferences on round
prices derive confl icting results when comparing them with studies on 9 – ending prices. Even
though this discrepancy can be attributed to a weak price awareness on the consumers’ part, it is also

2 Sonnemans, (2006) Price clustering and natural resistance points in the Dutch s tock market European
Economic Review, Volume 50, pg. 1937 –1950.

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possible that it would be unwise to compare round and non – round prices due t o difference in
products and markets examined.
Non – round prices (9 – ending) are associated wit h discounts and lower priced it ems (such
as groceries , other commodity products ) and ev en though they are also enabled for higher priced
items (electronics) they are only effective when combined with other psychological principles and
tactics (comparative pricing, bundling, BOGO, scarcity). On the other hand, round prices tend to be
associated with high quality or high importance awarded to the utility of the pr oduct (real estate,
jewelry). Luxury markets often considered price display to be „bad practice” there fore empirical
evidence towards price preferences are hard to encounter. However, since expanding to online
marketing, luxury product suppli ers have been faced with the obligation of displaying prices t hus
opening the doors to marketers and researchers. Furthermore, for a long time , luxury pricing ha s been
of little interest to academics due to the general consensus that the rationale behind such pricing was
that price itself has no meaning for their target customers and that gifts should not have their price
communicated (Parguel et al, 2015) , hence the lack of studies on prices to corroborate the theory that
high quality items are identified through even p rices. As such the conclusion can be drawn that these
studies provide poor evidence when analyzing whether consumers prefer odd prices or even prices
and vice – versa because they involve choices between products rather than between prices (Lynn,
2015).
An experiment was conducted in the year 2015 by Michael Lynn, Sean Masaki Flynn and
Chelsea Helion in order to find out whether consumers exhibit any preferences towards even prices.
The experiments were carried out in a pay what you want situation and self pumped gasoline
purchases. They have folowed in the footsteps of other studies performed on pay – what – you –
want pricing practices and what motivates and influences consumers abut how much to pay ( Lynn,
1990; Regner & Barria, 2009; Riener & Traxler, 201 1 )3. Their hypothesis was that leaving the
option of choosing the price (whether as a whole payment or simply the point at which to stop)
would allow them to observe the true preferences of the consumer, according to th eir internal needs
and stimuli (all involving actual payment for goods and services in the market place). Their data
shows that when asked to pay what they want that for an online computer game (The world of Goo)
that 57% of consumers chose to pay a round whole – dollar amount and another 4% chose to pay a
round half dollar amount (ending in .50). This disproportionate choice of amounts payed can be

3 Lynn, (1990 ) Choose your own price: An exploratory study requiring an expanded view of price’s functions Advances
in Consumer Research, Volume 17, pg. 710 – 714
Regner & Barria (2009) Do con sumers pay voluntarily? The case of online music Journal of Economic Behavio ur and
Organization, Volume 71, pg. 395–406
Riener & Traxler (2011) Norms, moods, and free lunch: Longitudinal evidence on payments from a pay -what -you-want
restaurant Journal of S ocio-Economics

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attributed purely to a preference towards even prices since the payments were made electronically
therefore there was no need to handle small cha nge nor can it be attributed to a desire to avoid small
calculations since it was done in a PWYW method (Lynn, 2013). After examining the consumers
preferences when tipping in a restaurant, the authors further underlined a preference towards round
prices. In a proportion of 23%, t he clients chose to leave the amount of tip that whe n adde d to their
meal bill would result in a round price. Another prevaling preference was simply leaving even
numbered tips, especially in the cases of customers who payed with c redit cards, and did not have a
need to handle small change or make computations. Customers also seemed to cluster their tipping
amounts around multiples of five dollars. (Lynn 2013, pg. 99) . The last experiment examined the
customers decisions about the what quantity of a good with a fixed price to purchase. By examining
self pumped gasoline data sales, they have observed that 56% of data sales were a round, whole
dollar amount , while an additional 7% ended in .01 amount, which the author s theorize repres ent
failed attempts of the respondents to stop at a whole dollar amount (Lynn, 2013, pg. 100).
Following the conclusions drawn from these PWYW experiments aimed at observing
consumers’ pre ferences towards round prices, there can be extracted reasons and ex planations for
tendency to select even and odd prices at different times, for different products. Among alternative
explanations for a t endency to select round prices studies outline : a dislike for dealing with spare
change, a disinclination to think about trivial cent amount, a desire to av oid complex mathematical
computations, a desire to facilitate the recall of total amounts paid when making purchases over a
longer period of time and an image effect of even priced numbers to have higher qu ality (luxury items)
or higher importance (tendency to use even prices in sectors such as real estate or financial markets
may have conditioned consumers to think that way) . Likewise, when exaining odd ending prices
studies outline the main reasons for the consumers pre ferences as follows: Level effects attributed to
the underestimation mechanism (consumers round prices down, consumers read prices left to right and
have limited memory capacity) and image effects (consumers view 9 – ending prices as signals of
price disco unt and consumers may view 9 ending prices as a signal of inferior quality). Furthermore,
because of this image projections of 9 – ending prices being common in inferior quality or items of
lower importance/prices such as in the retail markets, when using this strategy for higher priced items
like electronics (TV, laptops, smartphones) or the fashion industry, it is necessary to introduce more
psychological principle in the strategy mix, one example being comparative pricing, among others.

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3. PSYCHOLOGICA L PRICING : OTHER PRINCIPLES AND PRACTICES

A wide range of diversity in the approaches firms engage in for setting prices and pricing
strategies for products may partially explain why some industry practices can appear inconsistent
with economic theory. Traditional economic thinking assusmes participants are rational and therefore
markets are always efficient. However, it is a known fact that consumers behave differently
according to a myriad of factors, that can affect them in different ways in different environments.
Assumptions made are that when presented with a variety of triggers or stimuli consumers change
their behaviour, sometimes in an irrational manner according to their own perceptions. Many firms
bypass the principles of traditional economic m odels and introduce psychological features in order to
enhance profits beyond the scope of what basic economic solutions offer. Following these methods,
it is possible for a firm to boost their performance in terms of profits and market share. Many
researc hers have observed this discrepancy between economic theory and pricing practices in the
market, more specifically the retailing one. Though there can be an array of causes, specific to
different sectors of the economy, s tudies have found that one explanat ion for this disparity arose
from the managers’ and marketers’ use of psychological principles to enhance the profitability of
their pr icing decisions (Larson, 2015).
As exemplified in the previous chapter, pricing strategies can be an immensely useful too l in
highlighting product attributes in ways perceived to be positive or responding to the customers’
needs and perceptions. 9 – ending prices have represented for decades the most effective strategy in
warping consumer perceptions, in the retailing sector in particular. However, there are many other
pricing approaches that can incorporate odd ending prices (comparative pricing or discounts) or that
can steer further away (even pricing) which will be further discussed . There are many principles to
be taken into account, with L arson4 identi fiyng in an article published in 2014 a number of 50
psychological principles encountered and used in preparing pricing strategies, classifying them into 4
categories: framing principles, congruency principles, context prin ciples and signaling principles.
However, only 3 more strategies will be selected, considered and exemplified in the following
paragraphs as they will serve a purpose towards constructing the practical part of this study.

4 Larson (2014) Psychological pricing principles for organizations with market power, Journal of Applied Business and
Econommics, Volume 16(1), pg. 11 – 25

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BOGO – Buy One Get One Free

Some of the more popular means of incorporating psychological principles in pricing
strategies are offering free units (buy one get one free – BOGO) which, when inspected from a
mathematical point of view, merely represents a 50% discount for a certain product . However, this
approach seems to generate far more positive responses from the general public rather than the
discount one. One of the main deciding factors of this strategy is that eliminates the sensation of the
buyer’s regret (such as in instances when consumers think „this chocolate doesn’t taste as good as I
thought it would”) which could also cause buyers to overvaluate free products. This could also relate
to the idea that there is no fear of loss created. Since free is an absolute price, there are no
computations required (such as in the case of normal discounts) or cognitive processes involved,
which by many consumers this could be seen as an advantageous trade off. Overvaluation is also a
deciding factor that makes customers react more positively to poducts advertised as free.
Shampanier5 and colleagues in a series of tests made in 2007 have concluded that the main reason is
emotion, as free goods simply produce more positive imaging as opposed to products discounted to
the same degree. Furthermor e, this could also have a negative effect on the supplier as research
shows that once a product has been bundled with another one and advertised as free, consumers also
become willing to pay less than the original price when that product is sold alone (Rag hubir, 2004).
This could be owned to the fact that consumers register a low internal reference price, which is later
judged against the full price of the product, and will then r ender it expensive in the eyes o f that
individual (Ahmetoglu 2014). Thus free offers have seemingly inconsistent effects.
One other supposition could be the fact that „free” promotions do not entail the image –
quality effects that discounts tend to offer (Larson, 2015). When invoking such a strategy an
important aspect seems to be t he characteristics of the primary product. For an item that is considered
to be part of the luxurious items category, adding a free gift may entice more customers than a
discount usually would. However, if the roles are reversed, and the free item is of ve ry high quality it
may force the customer to cast doubts on the quality or value of the primary item (Kamins, Folkes
and Fedorikhin, 2009). The effectiveness of such promotions also tends to be higher with items that
have longer durability or life time sp an (Li, Sun, Wang, 2007).

5 Shampanier, K., Mazar, N., Ariely, D., 2007. Zero as a special price: the true v alue of free products . Mark.
Sci. 26 (6), 742 –757.

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Product Bundling

Bundling is a marketing ploy in which several products are combined under one unit, and
marked with a discounted price. Product bundling as a strategy may be showcased in many forms,
starting from volume of fers (‚3 for the price 2’, ‚buy one, get the next one half -price’, ‚5 for $8’,
cable TV subscription packages) to comparative offers, where comparisons are made across the same
product category, but with different combinations of specifications (such as tw o cable WiFi + TV
subscriptions that have different combinations of channels and internet speeds). Often time s, such
strategies can be found with an odd ending price, but in addition to numerical cues, bundle offers are
preferred by customers because they signal a saving (even though there often isn’t one).
Similar to the BOGO approach, retailers often promote items as multiple unit purchase. By
encouraging the clients to purchase packages of the same items (2, 3 or more of the same item not
necessarily wit h a discount offer). Retailers in supermarkets have expressed findings of an increase in
sales of 165% when products had an advertisement of „Buy 10 Chocolate Santas for Christmas”, as
opposed to sales fro m the same items with an advert similar to „Buy Cho colate Santas for Christmas” ,
which have shown a lower increase , of 125% (Larson, 2015). Literature states that when using such
anchors, the starting point of the costumer can be changed and consequently so will their purchases
(Wansink, Kent & Hoch, 1998 ). Experiments performed by Bagchi & Davis in 2012 further show that
when using multiplt unit pricing, there are often impediments for customers to compute the price per
unit and due to such difficulties they tend to focus more on the first numbers they see . Therefore it is
much more advantageous for sales for multiple unit priced products to be promoted as „10 chocolate
santas for only $19” rather than „for only $19 buy 10 chocolate santas” (Larson, 2015, pg. 14).
Multiple unit price promotions, have been r esearched to have a high degree of influence for
retailers of packaged goods. Volume offers have been proved to increase sales promotion by 12%
across seven brands in three categories as compared to single unit promotions (Blattberg & Nestlin,
1990). Thes e results are in line with previous and following studies made on the subject. The general
consen sus is that multiple units offered in a bundle increase quantity purchase intentions compared to
single unit discounted products, even when if the calculated price/unit would be identical. This goes
on to show that a large portion of the population does not use unit prices. Substantial impact of
bundling is further sustained and demons trated in a comprehensive study by Foubert and Gijsbrechts
(2007), whose resu lts have shown that bundle discounts increase sales by a significant amount, while
single unit discounts are marginally less effective. In a similar fashion, a study performed on teeth
whitening products have shown that mixed bundle promotions can increas e purchase intentions

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(Johnson et al, 1999). There also studies performed through open ended questions that inferred that
indeed consumers do perceive bundling as methods of saving money (even when no saving s exist)
and further outline the consumers prefer ence towards convenience and minimal cognitive effort.
Convenience also seems to be preferred in terms of billing. In the domain of telecommunication
services, bundling is preferred simply because of the convenience associated with having all of the
consol idating charges of a chosen subscription on one bill .

Scarcity (Limited edition products)

Time limited offers are strictly based on the psychological principle of scarcity, according to
which people assign more value to items or opportunities that are becoming less available. The
availability of an i tems can serve as a shortcut cue for the evaluation of its quality. When imposing
limits on the available quantity or period during which the product is available, retailers can continue
to influence buying behaviour. The most familiar example is that of limited edition products.
Limited supply can be a positive signal in the cases of certain products or services (such as
an incredibly cheap plane ticket, offered only during certain hours of the day, in cer tain periods of
the year or black Friday promotions), especially for promotion focused customers. Studies show that
scarcity can become an attribute in the case of high quality and high priced items , especially since
coupled with promotional discounts it c an bring over customer s from demographic segments that
normally would not be able to afford such a product. People tend to assign more value to oportunities
or items when they are becoming less available, reason for which is very well illustrated by the
saying „the best things in life are worth waiting for”. Typically if something is mo re difficult to
obtain, it is seen as more valuable. The idea of fear of loss could also be invoked in some cases, as
some consumers may fear of losing out on a veritab le dea l (Ahmeto glu, 2014). Therefore sales can
be increased more than the price wou ld need to be decreased when coupled with a limited edition
strategy, by maximizing sales with potential customers from all segments of the market (Wu et a l,
2012).
Research in t he effects of scarcity as a buying incentive has been made from as far back as
1973, when Mazis et al6 discovered scarcity can be particularly effective during a product ban.
Another great example for illustrating this theory is the prohibition era in the USA during the 1920s,
when alcohol w as completely banned as a legally consumable product. However, this only seemed to

6 Mazis, Settle, Leslie (1973) Elimination of phosphate detergents and psychological reactance Journal of Marketing
Research Volume 10(4), pg. 390 – 395

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increase the desire of the citizens for consuming alcohol, which gave way to some of the most
creative and large networks of bootlegging of the decade.
Another factor that seems to play a large role in the impact of the restriction on the
consumer is the amount of the discount. Choice probability and perceived value are increased when
the discount is high (25% to 50%) while for dicounts of 5% the purchase intentions are lower and the
customer seems to register no fear of loss (Inman et al. 1997). Thus in addition to limit and length of
promotion the discount also has an impact on consumer perceptions when using time – limited
promotions. Dev lin et al’s (2007)7 study also conclude that given the preponderence of tim e limited
offers, customers are more likely to be desensitized to such offers , especially when talking about
durable products (TVs or cars) where there is little evidence to support the effectiveness of this
theory in boosting sales, because consumers may not expect limits to be honoured, or expect offers to
reappear quickly after the current ones expiry. The authors also conclude that this is usually because
the consumers themselves expect off ers to only be a marketing ploy and will only perceive
unavailability in rare cases such as when an old product line is to be taken off the market.

7 Devlin, Ennew, McKechnie, Smith, (2007) A study o f comparison price advertising incorporating a time -limited offer J.
Prod. Brand Manag. Volume 16(4), pg. 280 – 285

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II. EMPIRICAL ANALYSIS

1. RESEARCH CONTEXT : BACKGROUND – PC MARKET

According to the IDC Worldw ide Quarterly PC Tracker8, PC shipments totaled 71.9 million
units in the fourth quarter of 2015 (4Q2015), with a year -on-year decline of -10.6%. Although this
was already in line with the existent conservative expectations, the news closed the year 2015 a s the
first year to go below 300 million units sold since 2008, with the largest year -on-year decline
recorded.
The market faced persistent challenges from longer PC lifecycles and competition from
tablets and smartphones. Moreover , considering the contin uing economic issues such as falling
commodity prices and weak international currencies , as well as social and political disruptions that
had a significant impacts on all markets in the year 2015 , it is not surprising that the PC market is
facing such nega tive prospects. Lastly, the market seems to be slower when reacting to new
operating systems and hardware upgrades and configurations. Low -cost PCs and Windows XP
promotions have been ended with the launch of Windows 10, and the market is likely taking som e
time to respond to these advances. However, IDC Vice president Loren Loverde has decl ared that the
reports indicate that PC replacements should have a sudden surge towards the end of 2016 due to
performance and security issues that may be faced by users who are delaying upgrades, and also due
to more attractive pricing and products. Furthermore, IDC Worldwide PC Tracker indicates that
mainstream desktops and notebooks will continue to see longer life spans.
Vendor highlights further show the top 5 worldwi de seller of PC products (desktop and
portable) in the year 2015. Lenovo maintains it’s top rank for all of 2015, with an exceeding market
share of 20%. HP follows, though it slightly outperforms the market. Dell remains at the same
position as the 3rd wor ldwide vendor with an above market performance in the region of North
America. ASUS also outpeforms the market and moves into position number 4, with a market share
of 7.9%. Apple is considered to have tied with ASUS on the 4th position due to an minimal
difference in revenue (less than 0.1%), even though it was considered ahead on an annual basis. The

8 IDC's Worldwide Quarterly PC Tracker® fills the growing demand for detailed, timely, and accurate information on the
global PC market. It provides insightful analysis, quarterly market share data, and a five -year quarterly forecast by
country. The core of the product is a comprehensive electronic database detailing changes and trends in the highly
competitive PC market. IDC's Worldwide Quart erly PC Tracker is built on the foundation of IDC's network of country
level quarterly PC tracking services, and its bottom -up methodology delivers an accurate view of the PC market from
those closest to it (Product Category: Desktop PC’s and Portable PC’s ).

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company continues to showcase and a string run and outperform the market, increasin it’s share to
7.9% for the last quarter. It is also the only top 5 compan y to register a growth from 2014 to 2015(in
an amount of (6.2%), as all the others registered declines in wordlwide PC shipments.
When analyzing Romania ’s portable PC market (or laptop or notebook market) data is not
yet available on the performance of the year 2015, which unfortunately brings us to analyze data
from the year 2014. However, according to IDC reports it has been estimated that the market value
for PCs in Romania will also decline with an estimate of 6.9% in 2015 and will continue to register
small declines all throughout the years until 2019, when it will register a market value of
approximately 175 billion USD. Furthermore, PC shipments for the year 2015 were estimated to also
decline to 293.1 million units as opposed to 300 million units reg istered in the year 2014. The cause
cited by IDC is the same as in the 2015 IDC Worldwide Quarterly PC Tracker. Thus the assumption
can de made , based on IDC data reported, that users all throughout the world, including Romania, in
light of discontinuation of low cost PCs and OSs, are delaying personal computer upgrades in light of
their lower ed financial capabilities in the political – economic global context registered in the years
2015 – 2014. They are expected to increase their purchases due to dollar a ppreciation and innova tive
products that will b e launched in the coming years. However, these purchases will not be made to the
same degrees as in previous years, because the markets have registered year -on-year declines for
several years now, and because innovation in technology usually brings premium priced products
(such as Apple ones). Furthermore, users are often faced with the option of choosing between a PC
and a portable device such as a smartphone or a tablet, which are considered emerging market s.
In Table 2. 1. 1. it is possible to
examine the amount of shipments
made in the years 2011 – 2014 in the
international PC market. The data
sustains the conclusions drawn from
the 2015 IDC Worldwide Quarterly
PC Tracker, which is that PC
markets (desktop and portable) are
on a continuous decline.
Table 2. 1. 1. Shipments of PCs Worldwide 2011 – 20149
Year Shipments
(million units) Market
Growth
2011 403,210 +12.5%
2012 359,100 -19.5%
2013 315,625 -13.2%
2014 300,125 -4.3%
IDC studies further show that an estimate of 19.2% of Romania’s population make use of
portable PCs – laptops or notebooks – for their own personal use or for rofessional use in an
organization or institution. ANIS10 and IDC Romania further estimate th at sales on the Rommanian
portable PC market have decre ased in 2014 compared to the previous year. The main producers and
distributors that make up the Romanian market have international reputation (Toshiba, Fujitsu,

9 Data Collected from Magazin Critic, ISSN 2360 – 3321
10 Asociația Națională a Industriei de Software și Servicii

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Siemens, HP, IBM, DELL, Sony Vaio, ASUS , Acer, Lenovo) who are also followed by national
brands (Maguay Computers SRL) which are begining to look as a favorable alternative to many
consumers, due to their lower prices and optimal qu ality. Furthermore, in Table 2. 1. 2. it is possible
to observe the main competitors in the Romanian market based on their international market shares
and sales in year 2015.
Table 2. 1. 2. TOP 5 Vendors in the International PC Market (2015)11
Vendor 2015
Shipments 2015 MKT
Share 2014
Shipments 2014 MKT
Share 2015 /
2014
Growth
1. Lenovo 57,182 20.7% 59,306 19.2% -3.6%
2. HP 53,534 19.4% 56,869 18.4% -5.9%
3. Dell 39,049 14.1% 41,509 13.5% -5.9%
4. Apple 20,794 7.5% 19,575 6.3% 6.2%
5. Acer Group 19,680 7.1% 24,043 7.8% -18.1%
6. Oth ers 85,997 31.1% 107,063 34.7% -19.7%
TOTAL 276,216 100.0% 308,365 100.0% -10.4%

The demand for portable PCs is analyzed between two main categories of consumers: those
that purch ase a laptop based on utility and those that purchase laptops based on app earances (in order
to convey a certain image). Another important factor seems to be the fact that the brand is not the
main priority when consumers decide what laptop to purchase; therefore it could be possible for
smaller or national brands to keep up wit h established ones like Apple or HP. Studies also show that
for users that buy laptops based on utility the most imortant criteria is price and technical
configurations, while for those that buy based on appearances the main characteristics they base their
decisions on are design and dimensions. Furthermore, another important and common element
outlined between the two categories are the warranty and future services offered by the vendor.
The variables used for segmenting the market are geographic ones, de mographic,
psychographics and behaviouralistics. Geographically, the units are partitioned mainly to countries
with advanced economies (US, Europe, East Asia), where the environmental origin is predominantly
an urban one. Age, a demographic variable, is a nother important factor as it offers many possibilities
for customizing products to appeal to different age groups. The deciding factor here is that nowadays
children of all ages have access to a computer, whether it is their own or it belongs to their par ents.
Coupled with the fact that educational institutions nowadays also rely more and more on technology
when teaching, it can be said that the target segment of a laptop from the age point of view is
extended to almost all age categories. Furthermore, lif estyle and psychographics can also outline

11 Data collected from IDC Worldwide Quarterly Tracker (2016)

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several important segments, as well as education. For example, a gamer would require a laptop with
more capacity and speed, while a graphic designer would require a laptop with better videocard
characteristics and an IT specialist would require a PC with more processing power. At the other end
of the spectrum, there are the consumers who simply use a laptop for media and social purposes.
Other categories of users that would require laptops and PCs to be customized to their specific
preferences can be found in the business field.
On the Romanian market, the demand and supply are almost in equilibrium, especially on
the segment of customized products (where the user can order different components and assemble the
device with the help of the vendor or distributor). The producers do not fail to respond to the ever
growing demand of software and IT solutions. However when examining, the market from the point
of view of all consumers, it could be said that the supply sligh tly outweighs the demand due to the
wide variety of products that fulfill the same basic functions and needs for the consumers. Thus the
deciding factor remains to be the price (cost vs utility). Even though the IT industry has recorded a
tremendous growth in Romania in the past decades, there is great competition offered from
iternational brands due to the fact that they offer competitive prices which is a great advantage when
coupled with an established name brand.
The information sources that a Romanian consumer can access in regards to pur chasing a
laptop are of great variety; from online sources to paper based ones. In Romania, the main
advertising channels are comprised of magazines offered by distributors (ALTEX. Media Galaxy) or
online e -mail promot ional campaigns as it is pretty rare to see a TV ad for a certain laptop brand.
This fact contrasts a lot with situations in other countries, where advertising is much more heavily
TV based. The most effective promotion tool is estimated to be the price di scounts or bundling of
products (e -mag promotion: laptop ASUS with a discount of 300 lei + Logitech speakers) .
Furthermore, consumer trust is heightened when products are promoted through specialized
hypermarkets (Altex, Flanco, Domo)12.

12 Magazin Critic, ISSN 2360 – 3321

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2. RESEARCH OBJECTIVE

Vendors of items such as home electronics (smartphones, tablets, laptops or PCs) deliver a
product that may force some low to mid level income consumers to become much more price
sensitive when purchasing it (due its higher costs and higher uti lity). Thus, suppliers may be forced
to employ more than just one psychological tactic (9 ending prices + comparative pricing OR 9
ending price + product bundling) in order to maximize sales. Furthermore, it is also possible that in
the case of items such as laptops to incurr an even pricing strategy, as the image effects may force the
consumer to believe that the item is of a higher quality. The company Apple could be an example, as
it extensivley uses high prices for its products (MacBook Air= 6000 RON13) playing on luxury
perceptions of the consumers in order to maximize profits.
As described in the previous subchapter of this section , portable PCs were subjective in the
past few years to a year -on-year decline when it comes to sales and market growth, wi th only one top
company registering a growth in the year 2015, Apple with 6.2% registered growth (Table 3.2).
Moreover IDC Worldwide Quarterly PC Tracker has stated that low – cost PCs have had a sudden
decrease in market supply, as more advances in techn ology are made and products with a much
better performance are created, thus prices adjust accordingly. As such , users have stopped making
new purchases and are waiting for the prices to reach a more acceptable level in the future before
deciding to buy a new laptop (estimated by IDC to occur in late 2016). The Romanian market is
subjected to the same trends of lower sales in the year 2015, and slightly higher prices.
One of the main objective of the research study is to e xamine i f psychological pricing
tactics are effective in making the consumers perceive the price of a laptop as smaller. The other
main goal is to estimate what the consumers’ psychological price is , regarding a notebook with a
medium to high quality, according to their own internal refer ence price.
In Table 2. 2. 1. an overview was compiled of the psychological tactics used in pricing
strategies described in this paper , the main causes for which they are employed by marketers and the
main effects that they have in the eyes of the consume r. Thus, based on its effectiveness when used
singularily and when used in combination with odd even prices , one tactic will be chosen from
comparative pricing, BOGO, limited edition and product bundling to be tested during this study.

13 Data gathered from www.altex.ro (01/06/2016)

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Table 2. 2. 1. Psychological pricing: Strategies, Effects and Causes
Strategy Effect Cause
Odd Pricing Level effects – consumers round prices down
(9 – ending (Underestimation – consumers read prices left to right
Prices) Mechanism) – consumers have limited memory capacity
Images Effects – consumers perceive a discount wi th 9 ending prices which signal inferior quality
Even Pricing Implicit -dislike for dealing with spare change
(0 ending Preferences -disinclination to think about triv ial cent amounts
Prices) (Familiar stimuli -avoid complicated mathematical computations
Convenience) -facilitates the recall of total amounts paid
Images Effects -products are perceived as having higher quality (luxury items)
-products are perceive d as having higher importance (real estate, stocks )
Comparat ive Image Effects -forces customer to compare characteristics (cost vs. utility) between two products
Pricing Choose higher
Quality item) -when there are only two option most consumers would choose quality over their
budget
-signalling a discount (though there may not be one) is a decisive factor in creating
more value for the consumer
BOGO Over -valuate free -emotion: "free" has a more positive co nnotation
products -no image quality effe cts that discounts offer
Eliminates -no fear of loss created
Buyer’s Regret -no computations or cognitive processes required
Less willingness -register a low internal reference price which seems expensive when compared to
the
To pay to the orig inal price of the free product
Image effects -if the first product is lu xurious, the free product will be perceived the same
-if the free product is of very high quality, it may cast doubts on the 1st product’s
value
Limited Scarcity -more value is assigned to opportunities that are
Edition becoming less available (mainly for high priced items)
Fear of Loss -customers fear missing out on an advantageous offer
Image quality -choice probability and perceived value are increased when the discoun t is high
effects -time limited offers may have become ineffective due to the frequency with which
they are used (consumers constantly expect new offers to pop up)
Product Signal Savings -'3 for the price of 2'; '5 for $8'
Bundling -using anchors ("Sale!") can influence the customer into perceiving savings, though
in
many cases there are not any actual changes to the price
Multiple Unit -offer impediments in price computations, thus increase quantity purchase
intentions
Pricing intentions a s opposed to single unit pricing (though the price/unit may be the
same)
-convenience

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The main psychological tactic chosen to be tested alongside odd even prices is the product
bundling strategy. The reason for this is that product bundling strategies often employ discounts to
attract customers and 9 – ending prices are characterized as being an indicator for occurring
discounts. Furthermore, through this study it may possible to observe whether or not respondents do
indeed register bundling offer s as signalling a saving in the case of highly priced items and examine
the level of interest and sensitivity that young adults pursuing a higher education degree have to
psychological pricing strategies . Another main objective is to estimate the psycholog ical price of a
hypothetical home electronic product through the respondents’ willingness to pay.
To summarize, the main purpose of this study is to:
i. Estimate the psychological price as willingness to pay for a laptop of a medium to
high quality
ii. Verify w hether or not consumers ’ preferences are indeed swayed by odd – even prices
and product bundling tactic s when purchasing a product with a higher cost and higher
utility (laptop with a medium to high quality) .

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3. RESEARCH METHODOLOGY

3.1 Sa mple and Data Collection

In order to reach the two main objectives outlined in the previous section, a quantitative
study was carried ou t in the city of Iasi, Romania throughout a period of 1 week (04/03/2016 –
11/06/2016) using a survey administered thro ugh social media networking sites .
The target segment of the PC market that is to be analyzed during this study are young
adults, pursuing higher education degrees, as they represent category of the population that are
frequent users of portable PCs. Furt hermore, this target segment is characterized as actively
searching for higher quality products that could provide them with the necessary tools to exceed in
education as well as in the business field. Moreover , given the financial aspects that characteriz e
students – they are only partially financially independent or not at all – they also represent one the
group s that would most actively search for promotional offers or the highest cost vs. utility trade offs
that psychological pricing strategies are aime d to offer.
In light of the lack of an available sampling frame, the respondents were gathered by
convenience, through an online questionnaire distributed on social media networking sites
(Facebook). Students of the Faculty of Economics and Business Admini stration, in the „Alexandru
Ioan Cuza” University, from all cycles of study composed the sample analyzed . There were gathered
a number of 162 respondents, and a number of 153 valid questionnaires extracted .
The sample distribution in regards to the
study cyles that the respondents belong to
can be observed in Figure 2. 3. 1. Over half
of the sample – 62.75% of the respondents –
are following a bachelor degree in the
Faculty of Economics and Business
Administration. The next major category of
respondents are employed students making
up 24.84% of the respondents. Lastly
students following a master degree make up
10.46% of the sample, while PhD students
represent only 1.96% of the respondents.

62.75%
10.46%
1.96%
24.84%Study Cycle
Student (Bachelor
degree)
Student (master
degree)
Student (PhD)
Employed
Figure 2. 3. 1. Study Cycles – Sample Distribution

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The distribution of the sample in respect to
age can be obse rved in Figure 2 . 3. 2.
82.35 % of the sample was composed of
respondents with ages between 19 – 25,
which is to be expected since the survey was
carried out among students belonging to the
Faculty of Economics and Business
Administration of the „Alexandru Ioan
Cuza” University. The next pertinent age
category is 26 – 30 years old encompassing
9.15% of the sample, and respondents with
ages between 31 – 40 years old making up
7.19% of the sample. Lastly, there were
respondents in smaller numbers with ages
between 41 – 50 years old ( 1.31%).
The sample distribution in regards to the
gender of the resp ondents is presented in
Figure 2. 3. 3 . The sample was made up
of 75 % females, rep resenting the
majority, and 25 % males.

3.2. Design and Measurements
The su rvey was comprised of three parts, the first two to serve the two main goals and the
last part to gather more information in order to obtain a better vision of the analyzed sample .
i. The first part measured the willingness to pay of the respond ents, through stated preference ,
ensuring a direct approach through which to gather relevant data . The survey followed Marbeau’s
example (1987)14 and the respondents were asked to state the following:
1. “Above which price would you definitely not buy the product, because you can’t
afford it or because you didn’t think it was worth the money?

14 Breidert C. et al (2006) A review of the methods for measuring willingness – to – pay, Innovative Marketing
82.35%
9.15%
7.19%
1.31%Age
19 – 25
26 – 30
31 – 40
41 – 50
25%
75%Gender
Male
Female

Figure 2. 3. 3 Gender Distribution of the survey sample Figure 2. 3. 2. Age Distribution of the survey sample

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2. Below which price would you say you would not buy the product because you would
start to suspect the quality?”
The hypothetical product that the respondents were asked to state their preferred prices for was a
home el ectronic product with a medium to high quality, a high cost and a high utility: a laptop.
Based on the IDC Worldwide PC Tracker report, the company Lenovo currently holds the number 1
spot internationally in terms of ship ments made, regardless of the fact that it had registered a
decline from 2015 to 2014 (Table 3.2). Furthermore, its products consistently receive favourable
reviews in terms of tech support, warranty, software, innovation, value and selection and design.
Lastly, its range of products offered in the main distributing hypermakets and online shops in
Romania consists of laptops available for users in different categories (personal use, business,
gaming, ultrabook) with a varying range of prices, starting from 899.99 lei to 12 186.59 lei. For the
purpose of this study, the Laptop G aming Lenovo IdeaPad Y700 -15ISK, Intel® Core™ i7 -6700HQ
2.30GHz, Skylake, 15.6", Full HD, 8GB, 1TB, DVD -RW Extern, nVIDIA GeForce GTX 960M
4GB, FreeDos, Black has been chosen due to it s favourable reviews across many different online
platforms. It is described by the company as being a device custom made for business but capable
of much more and its price in Romania ranges across different distribut ors as described in
Table 2. 3. 1. :
Table 2. 3. 1. Laptop prices across different Romanian distributors15
Distributor Price Promotion
www.emag.ro RON 3,999.99 – 18% + warranty (24 months)
www.altex.ro RON 4,499.90 – 900 lei (no warranty)
www.mediagalaxy.ro RON 4,499.90 – 900 lei (no warranty)
www.flanco.ro RON 4, 279.90 – none

A hypothetical laptop was created with similar characteristics but no specified brand , in order to
eliminate potential influencing factors (brand image, promotional efforts, reputation etc.) and assess
the true opinion of the respondents re garding the cost vs. utility relationship of the presented
product. Thus, the respondents were asked to state their minimum and maximum prices in an
imaginary exercise, while taking into consideration the description of the technical specifications
they we re presented with. The product profile in the survey was presented with fewer specifications
than the real Lenovo IdeaPAd Y700 , in order not to cognitively overwhelm the respondents with
unfamiliar and complex notions. The products profile is as follows ca n be found in Annex 1.

15 Data gathered on the 1st of June 2016 from the official sites of the online distributors

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ii. The second part of the survey focused on verifying consume rs preferences towards odd even
prices and product bundling strategy. The research questions support a descriptive design that
relies on a survey questionnaire. The respondent s were not directly asked or made aware of the
intention to study price endings and their way of perceiving them, but took a conjoint approach.
Two new product profiles were created with characteristics modeled after Lenovo laptops as
in the previous exam ple, from technical attributes to the price they were assigned. The first section
was designed to evaluate whether or not the customer’s preferences sway towards odd or towards
even prices, by allowing them to choose from 2 products, each co rresponding wit h an even price and
an odd price (product profiles can be reviewwed in Annex 1).
The second section was designed to evaluate the consumers’ perceptions regarding product
bundling strategies. Two additional product profiles were created in the same manner a s in the
previous surveys, while adding promotional offers (as shown in Fig. 2). The consumers were offered
the chance to choose from 2 products, one bundled with a license for Photoshop CC and another only
containing an 18% discount.
This method estimate s the customers’ necessity for a given product, according to their
evaluation by comparison with an alternative product. Price endings represent one attribute, which
help estimate price perception through the utility attributed to different price endings, as literature
states.
iii. The last part consisted of a more extensive questionnaire , administered in order to gain a
better understanding of respondents’ involvement and interest regarding prices. The main aim
was to observe whether respondents that have a hi gher interest in price (price sensitive ), are
more desensetized to price ending strategies. The questions themselves consisted of 4
statements which the respondents were asked to rate according to how much they resonate
with the statement on a 1 to 5 like rt scale (1 – Strongly Disagree; 2 – Disagree; 3 – Neither
Agree Nor Disagree; 4 – Agree; 5 – Strongly Agree). The p rice involvement measure was
adapted according to Zaichowsky’s (1985) personal involvement inventory scale, adapted for
the research context, by following methods introduced in another study on price endings
influence in tourism industry, by Kleinsasser & Wagner (2011)16 . In order to measure price
interest, the Likert scale consisted of items presented in Annex 1. The statements were
presented last, so as not to influence the cognitive processes of the respondents when they
were asked to choose between promotional offers and prices.

16 Kleinsasser & Wagner (2016) Price endings and tourism consumers’ price pe rceptions , Journal of Retailing
and Consumer Services, 18, pg. 58 – 63

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4. RESULTS AND DISCUSSIONS

4.1. Price interest and sensitivity

The survey checked for the price interest and sens itivity of the sample in order to gain a
better image and description of the respondents and the effects that these characteristics have on their
choices and perceptions regarding prices .
According to the survey, 64.7% of the respondents (Figure 2.4.1.) h ave stated that they
firstly inform themselves of all available options on the market, before actually making a decision in
regards to purchasing a product, in this case – a laptop. When considering the portion of the sample
that also stated ‚Agree’ – 24.2%, it can be observed that 88.9% of the sample makes a comparison of
all the products on the market before making a purchase, indicating that the university students are
highly interested in the cost vs. utility trade off and are actively searching the mo st optimal offers
according to their own specific needs.

Figure 2. 4. 1. Price interest – Preference regarding acquiring information on market options when making a purchasing decision
The next measure was used to gauge th e respondents’ involvement in finding the lowest
prices available on the market. Figure 2.4.2. showcases that the highest percentage of the respondents
(24.2%) disagree with the statement that searching for the lowest prices is not worth the time and
effor t spent. Thus the inference can be made that price is quite an important component in purchasing
a product. However, while examining the graph, it can be observed that the differences between
percentages of respondents on either degree of the Likert scale are rather small . It could also be said
that the respondents are almost evenly spread across all possible options on the Likert scale regarding
this statement. Thus it would be quite difficult to make a decisive inference on whether or not the 1.30%4.60%4.60%24.20%64.70%
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%STRONGLY DISAGREEDISAGREENEITHER AGREE NOR DISAGREEAGREESTRONGLY AGREE

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sample is mo re or less involved in discovering the lowest price available. A more definitive direction
in this study would be to investigate whether or not the respondents that disagree with the statement
‘Money saved by searching for the lowest price is not worth the effort and the time spent. ’ have a
lower income than others, which is what drives them to focus solely on low prices.

Figure 2. 4. 2. Price interest – “Investing time in finding the lowest prices is not worth the effort”
Towards the purpose of examining the price interest of the respondent according to their
income level, a One – Way ANOVA analysis was performed using SPSS. The dependent variable
was the income level, while the grouping factor was the statement ‘ Money saved by searching for the
lowest price is not worth the effort and the time spent. ’, measured on a Likert scale (1 – Strongly
Disagree to 5 – Strongly Agree).
H0: μ1 = μ 2= μ 3 = μ 4 = μ 5 = 0: the income level between respondents that rated the statement
differently is the same ;
H1: μ1 – μ2 ≠ 0: the income level between respondents that rated the statement differently is also
different ;
With a significance level equal to 0.05, the test proved to be statisti cally significant (Table
2. 4. 4 . from Annex 2) and the null hypothesis is rejected. Therefore it can be interpreted that
respondents who have strongly disagreed with the fact that it is not worth it to spend time an d effort
in finding the lowest prices have a different income level than those who have agreed with that fact.
The Post Hoc Analysis of the ANO VA test further showed that the income level of the respondents
that strongly agreed that it is not worth the tim e and effort spent in finding the lowest prices was
significantly higher than the income level of the respondents that disagreed w ith the statement (Table
2. 4. 5. – Annex 2) . The difference in the means of the income across the distribution on Likert scal e
levels can also be observed in Figure 2. 4. 3.
The income level of respondents who believe it is not worth it to spend time and effort in
searching for the lowest prices and thus have low price sensitivity resides in the interval 4500 – 4800
RON, while r espondents that have chosen Disagree and Strongly Disagree and thus have a much
higher price sensitivity have an average income level between 1200 – 1700 RON. 24.20%22.90%19.60%20.30%12.40%
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%STRONGLY DISAGREEDISAGREENEITHER AGREE NOR DISAGREEAGREESTRONGLY AGREE

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Therefore, it could be assumed that students pursuing a higher degree in education with a lower
income level are more sensitive to prices and have a higher interest in searching for the lowest price
available on the market, and time and effort spent are attributes with a low er level of importance for
them when they are purchasing an item with a high er utility and a higher cost.

Overall, when examining the price sensitivity of the respondents and their personal
involvement in assessing the price during the purchasing process , the research results show that the
sample is highly inter ested in the price of the products. Hence, the research results prove that
students of the Faculty of Economics and Business Administration of the “Alexandru Ioan Cuza”
University assign great importance to the role of the price during the purchasing proce ss of a
notebook ; the majority of the po pulation (88.9% – Figure 2. 4. 2 .) attentively examines all options
available on the market before making a decision. This type of behaviour that is highly aware of
prices and is prone to actively scout ing the market distributors for the lowest cost is more
pronounced in students that have a lower income level, as their limited financial capabilities forces
them to consider cost as the most important factor, before time and effort spent in purchasing a
product.

Figure 2. 4. 3. Means Plots – One Way ANOVA: Income Levels

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4.2. Estimation of p sychological price

In order to estimate what the internal reference price would be for medium to high quality
laptop the respondents were asked to state the minimum and maximum price they would be willing
to pay for the presented product profile. The prices ranges are as follows:

In Table 2. 4. 1., it can be observed that for the maximum price, the lowest values are equal
to the values of the minimum price . After calculating outliers, statistics show that ther e are outliers
only in the upper levels of the sample distribution, (values higher than 5250 RON for maximum
price, and values higher than 3300 RON for minimum price). As such, even though the lowest level
of minimum prices should theoretically have been d ifferent than the lowest levels of the maximum
prices, in this study the price inputs of the sample are significantly lower in the maximum
requirements. Furthermore, the me an values of the maximum pr ice are also significantly lower than
the price that a lap top with the quality described in the product profile has on the real market which
ranges from 3999.99 RON to 4499.99 RON (Table 2. 1. 3.). This result could be attributed to several
factors:
 Firstly, the sample is characterized as highly price sensitive, especially in the case of
respondents with a lower income level. Therefore it is not surprising that the willingness to
pay of the sample is centred around small prices;
 Secondly, the study has not assessed the participants’ level of knowledge regarding te chnical
specifications with respect to laptop composition . Consequently, even though the quality of
the product they were presented with is medium to high, the majority of the participants may
simply not be aware of that fact and adjust their prices accor dingly Maximum Price Minimum Price
Highest Values 12000 5000
7000 4000
6000 4000
4000 3800
Lowest Values 100 100
300 100
300 100
500 200
Mean Value 2203.45 1360.69
Table 2. 4. 1. Values for Maximum/Minimum Stated Preference Survey

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After eliminating values that are considered outliers, the new frequency of the sample
distribution can be observed in Tab le 2. 4. 2. The sample has been reduced to 150 respondents, as
opposed to 153, and the new mean value for the maximum price is 2099.50 RON, while the mean
value for the minimum price of the sample is 1315.50 RON.
Subsequently, by calculating an average va lue between the mean values of the maximum
and minimum price inputs of the sample, it is possible to estimate the closest true value to the
internal reference price that students from the Faculty of Economics and Business Administration
would be willing to pay for a laptop with a medium to high quality. The resulting value is 1707.5
RON. As mentioned above, this price is much lower than the market price of a product with a similar
quality (Table 2. 1. 3.) which outlines the several future research possibili ties.

Lastly, through the willingness to pay stated preference survey it is also possible to observe
that the majority of the sample stated even prices as inputs. This fact is in accordance with results
from previous studies mentioned in the theoretical part of the paper , where in experiments carried out
in a pay what you w ant manner in a real market place the majority of the sample used even prices17.
As such, this research result can be further used to corroborate the existence of an inherent bias of the

17 Lynn, (1990 ) Choose your own price: An exploratory study requiring an expanded view of price’s functions Advances
in Consumer Research, Volume 17, pg. 710 – 714; What is the maximum price you would
be willing to pay for the presented
product? What is the minimum price you would be
willing to pay for the presented product?
N Valid 150 150
Missing 0 0
Mean 2099.50 1315.50
Median 2000.00 1200.00
Mode 3000 1500
Minimum 100 100
Maximum 5000 3000
Table 2. 4. 2. Frequency – WTP Stated Preference Survey
Price Ending xxx9 RON xxx0 RON
Frequency 2 151
Percentage 1.31% 98.69%
Table 2. 4. 3. Sample Distribution – Odd Even Price Endings

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41
consumer towards even prices due to ease of remembering and processing them and convenience in
performing mathematical computations18. It can be observed in Table 2. 4. 3.that out of 153
respondents only 2 used prices with an odd ending. This can be attributed to the fact the sample was
composed of students in the economic fi eld and they are more familiar with price setting practices in
the professional environment, and are using odd price endings not because of a personal preference
but because they have instructed to perceive them that way.
However, this fact raises the ques tion on whether or not young adults pursuing higher
education degrees in economic fields should be examined differently from the rest of their
population. The knowledge their chosen course of education provides them with may cause them to
become desensitiz ed to certain pricing strategies.

18 Idem

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4.3. Effectiveness of psychological pricing strategies on the consumers’ preferences

4.3.1. Odd – Even Pricing
When assessing the way the consumers behave with respects to o dd – even pricing
strategies, the research r esults show that a
proportion of 67.3% of the sample (which is
more than 2 thirds of the sample) selected the
notebook with an odd price attached to it . This
fact can have rather significant implications in
regards to the inherent preference of the
populat ion towards 9 – ending prices because
of two main reasons:
 Firstly, the differences between the
technical specifications of the two products
were very small, as the product profiles were
created according to the same level of quality;
for this reason, the choice of the respondents
for Product 1 cannot be attributed to individuals choosing a product with a higher quality over
another;
 Secondly, the monetary difference
between the odd and even price is of 4.01 RON, which is a negligible sum when compared to the
overall cost of the notebooks , which resides in the range of thousands of lei. Ergo, the majority
choosing Product 1, with an odd price cannot be attributed to the sample selecting the product with
one lower cost over another.
Overall, the results in t his section of the study can be used to corroborate the existence of an
inherent preference towards 9 – ending prices for students in the course of obtaining a higher degree in
education, when considering items with a higher utility and a higher cost such as a notebook. These
results are in line with the conclusions from previous studies explored in the literature review part of the
paper, which also show increased sales when using 9 – ending pri ces. However, these results do not
validate the theory that it ems that are perceived as having a higher utility and a higher quality (such as the
medium – high quality notebook profile presented during this study) are more attractive to consumers
when using even prices. The image effects of odd even pricing that are perceived by the consumers when
67.30%
32%Odd -Even Pricing
Odd Price:
2425.99 RON
Even Price:
2430.00 RON
Figure 2. 4. 4. Odd – Even Pricing Sample Pre ferences Distribution

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purchasing a laptop have not been explored in this study , which could open new pathways for research
regarding the relationship between psychological pricing strategies and laptop price estimation.
4.3.2. Product Bundling
Examining the results of the 3rd
section of the survey, the research study
shows that when applying product
bundling strategies to the profile of a
notebook with a medium to high quality,
64.7% of the respondents have chosen to
pay a higher price for the bu ndled product,
as opposed to paying a lower price for a
discounted product. This fact can have
significant implication s regarding the
effectiveness of the product bundling
strategies, because:

 The majority chose the product
with the higher price, therefo re this pricing strategy can influence groups such as students which are
characterized by low incomes and high price sensitivity to choose a higher priced item
The effectiveness of the product bundling strategy can consequently be estimated as being
very h igh when applied to the chosen product. More accurately, it can be inferred that the student
population of the Faculty of Economics and Business Administration of the “Alexandru Ioan Cuza”
University are highly susceptible to product bundling strategies an d prefer to purchase products in
that manner. Likewise, the respondents were also measured on how desensitized they were to product
bundling strategies. Specifically, 51.6% of the sample has stated that they prefer to first check the
price of the individua l products in a bundle, and afterwards compare it to the bundled price. Another
30.1% of the respondents also agree with this fact, as shown in Figure 2. 4. 6.
Overall, it can be observed that 81.7% are highly interested in prices shown in product
bundling strategies, and they prefer to go through an intense decision making process before making
a purchase. This result and the amount of respondents that favour bundling strategies are rather
disproportionate when compared to one another. Firstly, it has been established that the sample is
highly price sensitive, as expected of students who pursue a higher education degree that are
characterized by limited financial resources. Therefore, it would only be sensible to assume that they
will choose the product wit h the lowest cost; however, as shown in Figure 2. 4. 5., most respondents
64.70%
34.60%Product Bundling
Bundled Product:
3899.99 RON
Discounted
Product: 3809.99
RON
Figure 2. 4. 5. Product Bundling Sample Preferences Distribution

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chose the bundled product with a higher price as opposed to the discounted one with a lower cost.
This fact is in accordance with theories explored in literature review, which state that purchase
intentions are increased when discounts are assigned to bundled products rather than when
consumers are confronted with unit discounts ( Foubert & Gijsbrechts, 2007 ). Previous studies outline
that the main reason for this is that consumers oft en register higher savings when discounts are
assigned to 2 products, rather than only 1.

Figure 2. 4. 6. Sample Distribution – Product Bundling Strategy Sensitivity

% of Total
I prefer to purchase products in a prom otional package (laptop +
printer with 25% discount) because I save more money.
Total Strongly
Disagree Disagree Neither Agree
nor Disagree Agree Strongly
Agree
Considering the
2 offers
presented above,
the product you
would choose is: Bundled product
(3899.99) 4.6% 8.6% 18.4% 21.7% 11.8% 65.1%
Discounted Product
(3809.99) 2.0% 7.2% 10.5% 8.6% 6.6% 34.9%
Total 6.6% 15.8% 28.9% 30.3% 18.4% 100.0%
Table 2. 4. 4. Chi Square – Product Bundling
Additionally, even though as shown in Figure 2. 4. 6., the sample has characterized itself as
highly sensitive and interested in price as an attribute when making a purchase decision, their actual
behaviour is not in accordance with that fact, as the majority migrated towards the hig her price. In
Table 2. 4. 4. A Chi square test was performed in order to analyse the sample’s perceptions towards
product bundling saving effects and proportion with which they chose a bundled product in the 2nd
section of the survey. Out of the 65.1% of r espondents that preferred bundled products, 3.30%2.60%11.80%30.10%51.60%
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%STRONGLY DISAGREEDISAGREENEITHER AGREE NOR DISAGREEAGREESTRONGLY AGREE"When I encounter promotional packages I first compare the individual prices of the products with the
bundled price before making a decision ."

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approximately half of them (33.5%) do believe they save money by purchasing goods marketed in
this manner. The remaining of the sample is either undecided on the saving capabilities of purchasing
multiple unit go ods (18.4% of the sample) and in a smaller amount of 13.2%, the respondents do not
agree with that statement. However, this fact has significant implications on the effectiveness of
product bundling strategy, as even though 31.6% of the sample was undecide d or in disagreement
with the fact that promotional packages offer savings, they still exhibited a preference towards
bundled products. For the respondents that chose to purchase the single unit product, as expected
there is a small amount that agrees that bundled products offer savings – only 15.6% of the overall
sample.
In general, product bundling strategies applied to a high utility and highly priced good
registered significant effects on the sample during this research study. Bundled products were
preferred by the sample even when they expressed mistrust towards the saving capabilities of the
pricing strategy. These findings are in line with the explored theory, which states that there is usually
a great discrepancy between the consumers’ perception of their own behaviour and the behaviour
they actually exhibit, due to the fact that individuals are susceptible to many stimuli from their
surrounding environment which may influence their decision making process and their price
sensitivity (Hinterhuber, 201 6).

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5. RESEARCH CONCLUSIONS

The two main objectives of the research performed and analyzed throughout this paper were
to estimate the psychological price of young adults pursuing a higher education degree in the Faculty
of Economic s and Business Administration from the „Alexandru Ioan Cuza” University and to assess
the effectiveness of odd even pricing and product bundling strategies in regards to a medium to high
quality product, namely a laptop.
It has been assessed that the pric e sensitivity and price interest of students is rather high,
particularly for those with a lower income level. This fact is to be expected and it also has significant
effects when assessing the two main goals of the study. Firstly, the estimated internal r eference price
of the sample was 1707.5 RON, which is significantly lower than the real market prices of products
with a similar level of quality (Table 2. 1. 3.). The existence of this understated price could be owed
to the general price interest of the s ample, who have expressed that they prefer to inform themselves
of all options available on the market – including the lowest prices – before making a purchase
decision.
Through the willingness to pay survey, it was also possible to inadvertenly observe t he
preference of the sample towards odd or even prices. Most respondents used even prices, which is in
line with previous studies that have concluded that there is an inherent preference bias towards even
prices due to their ease of processing and familiar ity. There were only 2 respondents out of the entire
sample that have chosen to state their willingness to pay through odd prices, but this circumstance
could be owed to fact that the sample was composed of students specialized in economic fields, and
the knowledge they attained throughout their education may have conditioned them to have a bias for
odd prices. After examining the effectiveness of odd even pricing approximately two thirds of the
sample chose the product that had an odd price attached to it. The lack of distinctive features in the
two product profiles and in the monetary values assigned have significant implications, mainly that
there is reason to assume that the respondents displayed a preference for odd prices , as opposed to
even ones .

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When appraising the effectiveness of product bundling strategies on the purchasing
behaviour of the sample, the research shows that consumers do in fact prefer to buy bundled products
when con sidering a product with a high utility and a high cost, such as a la ptop. This finding
becomes more pertinent when compared with the fact that the respondents characterized themselves
as having a high interest in individual prices of a bundle – otherwise said , they saw themselves as
desensitized to this strategy. Bundled p roducts were preferred by the sample even when they
expressed mistrust towards the saving capabilities of the pricing strategy. T heir actual registere d
behaviour conflicts with the sample’s own assessment of their behaviour. These results further
corrobora te the existing theory that consumers ’ own observations of their preferences are often
flawed, and their actual behaviour is susceptible to various stimuli in their environment, which may
force them to act in an irrational manner. Furthermore, these result s can also be used as evidence to
support the fact that customers tend to register higher saving s when discounts are assigned to
bundled products rather than when faced with discounted single units.

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6. LIMITATIONS AND FUTURE RESEARCH

The first section of the survey was designed to measure the willingness to pay of young adults
pursuing higher education degrees in the Faculty of Economics and Business Administration of the
„Alexandru Ioan Cuza” University using a stated preference direc t survey. The limitations pertaining
to this method of measurement are in quite a high number. Firstly, by asking the respondents for a
price, there was an exacerbated focus on price which can displace the importance of the other
product attributes. Likewi se, the individuals have no incentive to reveal their true thresholds and
willingness to pay. Individuals may overstate prices, or they may understate prices as it happened in
this study. Regarding understated prices, Nessim & Dodge (1995, pg. 72) theorize that „buyers in
direct responding may also attempt to quote artificially lower prices, since many of them perceive
their role as conscientious buyers as that of helping to keep prices down”19. The overall average price
the sample stated for the presented p roduct was much lower than the market price of a product with
similar quality. The estimated price of a notebook with medium to high quality may have been found
out according to the sample’s true valuation of the good and not accor ding to understatement on the
respondents’ part , as they were estimated to have high price s ensitivity due to lower incomes.
Unfortunately, the respondents’ true valuation of the product is not in accordance with the true
purchasing price of the product and will not translate into real buying behaviour.
Secondly, directly asking the respondents to state their willingness to pay for a complex good
such as a laptop (which requires individuals to have a certain technical knowledge in order to be able
to accurately measure its quality) may prove to be a challenging task from a cognitive point of view,
which can also lead to understated or overstated prices. Lastly, the perceived valuation of a laptop
may change from the point of view of the consumer, according to many attributes that we re not taken
into consideration when administering the survey, such as brand recognition . Moreover, the
frequency with which this product is purchased is fairly low, generally occuring once every couple of
years, therefore the perceived value of the produc t can overcome drastic changes in such long periods
of time. The price decision in this study was rather simple and one dimensional, whereas real life
buying decisions are much more complex and take more factors into account.This survey was also
represent ing an imaginary exercise, and was not conducted in a real market place as other
experiments referenced during the study20. An experimental design, conducted with the help of a real

19 Nessim H., D odge R. (1995) Pricing -Policies and Pro cedures London: MacMillan Press
20 Lynn, (1990 ) Choose your own price: An exploratory study requiring an expanded view of price’s functions Advances
in Consumer Research, Volume 17, pg. 710 – 714

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laptop distributor and/or producer would yield much more pertinent results regarding the true internal
reference prices of the consumer.
In regards to the 2nd and 3rd sections of the study, the respondents were asked in an indirect
survey to choose a product, price being one attribute among many others. Theory shows that when
the respondent is asked to choose among competing products and prices and is generally offered
alternatives (as opposed to simply being asked to state their own price), they process wil be
registered as much easier from a cognitive point of view (Brown et. al . 1996). However, there were
several limitations during this study concerning the range of available offers to choose from, as the
respondents were only presented 2 products in each case. Furthermore, the main objective of this
study was to assess the pric e preferences of the sample, but this was executed without taking into
consideration the effects that other attributes of the product would have on the decision making
process of the sample.
With respect to future research, it would be more accurate to co nduct a conjoint analysis,
which is a technique for measuring the respondents’ preferences via systematical variations of
product attributes. Thus, by arranging the product attributes according to the sample’s perceived
preference and award a rank order to the product specifications, it would be easier to estimate the
importance of the price to the respondents, and according to that factor, estimate the degree of the
influence that pricing strategies have on the individuals.
The measured price sensitivity of the sample was also high, particularly for respondents
with a low income level. This result is in accordance with most other existing studies, and is
beneficial to estimating the effects of psychological pricing strategies as they are generally aimed at
influencing the customers into perceiving the existing prices as much lower than they really are.
However, the high price sensitivity of the sample may not only be owed to low financial resources
that generally characterize students, but also to the fact that the sample was composed of young
adults pursuing degrees in economic fields. They may have knowledge about market practices and
strategies invoked when distributing products which may cause the sample to become desensitized to
pricing strategies and a ct as desired by the producers. This fact would present a new pathway for a
study, namely to measure the level of awareness of young adults with degrees in economic and
business administration fields to market ing practices, and how much their academic know ledge
affect s their decision making process when making personal purchases.

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ANNEX 1 – QUESTIONNAIRE

Section I: Notebook Brand XYZ
Display : 15,6"
CPU: Intel® Core™ i7; 2,6 GHz
Memory: 12 GB
Hard Drive: 1 TB
OS: Windows 8
Color: Black
*Prices will be r egistered in RON. Please only input the number in the alloted space, without any other specifications.
Q1. What is the maximum price you would be willing to pay for the product described above? (the
threshold above which you would not pay because your fina ncial resources do not allow you or you
would not think the product is worth the price): __________________
Q2. What is the minimum price you woould be willing to pay for the product desribed above? (the
threshold you would not be willing to go under becau se you would start doubting the quality of the
product): ___________________

Section II
The products described downwards represent 2 notebooks belonging to the same XYZ producer:
Figure 2. 3. 4. Odd – Even Pricing Survey – Product Profiles
Specifications Product 1 Product 2
Display Size 15.6 inch 15.6 inch
Resolution 1920 x 1080 1600 x 900
CPU Intel Core i3; 2 GHz AMD A10 – 7300; 1.9 GHz
Memory 8 GB 8 GB
Hard Drive 700 GB 1 TB
OS windows 10 windows 10
Colour Black Black
Price RON 2,425.99 RON 2,430.00

Q3. Considering the attributes of the 2 product profiles, the one you would most likely choose is:
 Product 1
 Product 2

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Section III:
The products described downwards r epresent 2 notebooks belonging to the same XYZ producer:
Figure 2. 3. 5. Product Bundling Survey – Product Profiles
Specifications Product 1 Product 2
Display 16 inch 15.6 inch
Resolution 1920 x 1080 1600 x 900
CPU Intel C ore i5; 2.5 GHz Intel Core i5; 2.3 GHz
Memory 8 GB 8 GB
Hard Drive 1 TB 1 TB
OS windows 10 windows 10
Colour Black Black
Warranty 36 months 36 months
Delivery free of charge free of charge
Promotion + Photoshop CC ( – 65%) – 18% discount
Price RON 3,899.99 RON 3,809.99

Q4. Considering the attributes of the 2 product profiles, the one you would most likely choose is:
 Product 1
 Product 2

Section IV:
Q5. I like to be informed of all options av ailable in the market before making a decision regarding
the purchase of a laptop.
1 – Strongly Disagree; 2 – Disagree; 3 – Neither Agree Nor Disagree; 4 – Agree; 5 – Strongly Agree
Q6. Money saved by searching for the lowest price is not worth the time an d effort spent.
1 – Strongly Disagree; 2 – Disagree; 3 – Neither Agree Nor Disagree; 4 – Agree; 5 – Strongly Agree
Q7. I prefer to purchase products in a promotional package because I save money.
1 – Strongly Disagree; 2 – Disagree; 3 – Neither Agree Nor D isagree; 4 – Agree; 5 – Strongly Agree
Q8. When I encounter promotional packages I first compare the individual prices of the products
with the bundled price before making a decision.
1 – Strongly Disagree; 2 – Disagree; 3 – Neither Agree Nor Disagree; 4 – Agree; 5 – Strongly Agree

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Section V: Identification
Q9. What is you r occupation?
 Student (bachelor degree)
 Student (master degree)
 Student (PhD)
 Employee
 Other:__________
Q10. What is your age category?
 19 – 25 years old
 26 – 30 years old
 31 – 40 yea rs old
 40 – 50 years old
Q11. What is yourr gender?
 Male
 Female
Q12. What is your income?
*Your answer will be registered in RON. Please only input the number in the alloted space, without any other
specifications.
 _____________________________

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ANNEX 2 – ONE WAY ANOVA

Table 2. 4. 4. One Way ANOVA test results
What is your income?
Sum of Squares df Mean Square F Sig.
Between Groups 176120218.774 4 44030054.693 8.886 .000
Within Groups 728387436.746 147 4955016.577
Total 904507655.520 151

Table 2. 4. 5. One Way ANOVA – Post Hoc Analysis
(I) Money saved by
searching for the lowest
price is not worth the effort
and the time spent. (J) Money saved by
searching for the lowest
price is not worth the effort
and the time spent. Mean
Differe nce (I -J) Std. Error Sig. 95% Confidence Interval
Lower
Bound Upper
Bound
Strongly Disagree Disagree 434.300 524.873 .922 -1015.36 1883.96
Neither Agree nor Disagree -367.110 546.888 .962 -1877.58 1143.36
Agree -1212.695 541.995 .172 -2709.65 284.26
Strongly Agree -3028.927* 628.259 .000 -4764.14 -1293.72
Disagree Strongly Disagree -434.300 524.873 .922 -1883.96 1015.36
Neither Agree nor Disagree -801.410 553.840 .598 -2331.08 728.26
Agree -1646.994* 549.009 .026 -3163.32 -130.67
Strongl y Agree -3463.227* 634.320 .000 -5215.18 -1711.28
Neither Agree nor
Disagree Strongly Disagree 367.110 546.888 .962 -1143.36 1877.58
Disagree 801.410 553.840 .598 -728.26 2331.08
Agree -845.585 570.093 .575 -2420.14 728.97
Strongly Agree -2661.818* 652.654 .001 -4464.40 -859.23
Agree Strongly Disagree 1212.695 541.995 .172 -284.26 2709.65
Disagree 1646.994* 549.009 .026 130.67 3163.32
Neither Agree nor Disagree 845.585 570.093 .575 -728.97 2420.14
Strongly Agree -1816.233* 648.560 .045 -3607.5 1 -24.96
Strongly Agree Strongly Disagree 3028.927* 628.259 .000 1293.72 4764.14
Disagree 3463.227* 634.320 .000 1711.28 5215.18
Neither Agree nor Disagree 2661.818* 652.654 .001 859.23 4464.40
Agree 1816.233* 648.560 .045 24.96 3607.51
*. The mean difference is significant at the 0.05 level.

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