News release

From: Frontiers

Round up, just below, or precise amount? Choosing the final price of a product may be just a cultural thing

Researchers established a link between cultural dimensions and prevalence of round, just below, and precise prices

Have you ever noticed how the final digits of a price tag in a store usually follow a similar pattern? Scientists investigated this phenomenon and found that part of it might be down to the culture you live in. Looking at the levels of a society’s individualism, long-term orientation, and uncertainty avoidance, they found a link between these cultural dimensions and just-below, precise, and round prices. This suggests that pricing strategies transcend national borders and are influenced by cultural differences.

It is well known that culture influences consumer behavior, but the impact of culture on pricing is less studied. One way culture might reflect in price tags is through price endings, which can be round (eg $10.00), just below (eg £9.99), or precise (eg €9.87). While all these price endings are common, little is known about why sellers in certain markets prefer one over the others.

Now, researchers in Germany have examined whether cultural dimensions – individualism, uncertainty avoidance, and long-term orientation – impact how often consumers see certain types of price endings.

“Given that culture significantly influences behavior, cognition, and emotion—why not price prevalence as well?” said Dr Meikel Soliman, a researcher at Leuphana University Lüneburg and co-author of the Frontiers in Behavioral Economics study. “Our findings reveal an association between price endings and cultural dimensions.”

Is the price right?

There are six cultural dimensions that describe how a society’s culture impacts the values of its members and how these values affect behavior. In the current work, the researchers focused on three of them: individualism, which describes the extent to which people feel independent from others; uncertainty avoidance, defined as the extent to which members feel threatened by unknown situations; and long-term orientation, which describes cultures that tend to focus on the future in a way that delays short-term success in favor of long-term success.

The researchers included 9,200 prices from 23 different countries in their study. “Contrary to our expectations, higher individualism was positively associated with the prevalence of round prices and negatively associated with just-below prices,” said Soliman. “This might be because in individualistic cultures retailers might perceive just-below prices as signaling lower quality and avoid them to maintain a high-quality brand image and appeal to consumers seeking individuality.” In the study, individualistic cultures were represented by countries like Australia, Canada, and the Netherlands.

Cultures aiming to decrease uncertainty, on the other hand, might prefer just-below prices. “Just-below prices are linked to lower costs and ‘good deals,’” explained Soliman. “This may explain why retailers in high-uncertainty cultures favor signaling lower prices. Similarly, round prices may not strongly signal good quality, reducing their ability to ease uncertainty.” These cultures were represented by countries like Greece, Portugal, and Belgium.

The authors also found that long-term orientation was linked to a higher prevalence of round prices. “Round prices can convey quality and trust, helping retailers build long-term relationships,” Soliman pointed out. Cultures that favor long-term relationships were represented by countries including Estonia, Germany, and Spain.

Meeting pricing expectations

In a globalized world, where vendors often compete for customers from across countries and cultures, these insights could be used to provide a cultural perspective when setting prices. They also highlight possible cultural differences that impact pricing strategies and can help align prices with the culturally shaped expectations of customers. While the researchers did not directly examine whether familiarity with price formats increased the likelihood of consumers choosing certain products, they said it could result in choosing the familiarly priced product over others.

The team also pointed out that their study was limited is some respects. They examined just one e-commerce platform and focused on select countries, which may limit generalizability. In addition, the researchers did not observe a cause-effect relationship between cultural dimensions and price endings and didn’t examine underlying mechanisms.

Nonetheless, these insights into the culture-price relationship are important for retailers and anyone operating in a globalized market. “Vendors face diverse price expectations,” Soliman concluded. “Our research helps clarify these expectations, providing insights into how retailers adapt price endings across cultures.”