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Ending prices with ‘.99’ can backfire on sellers

Researchers found that this “just-below” pricing makes consumers less likely to upgrade to a more expensive version of the product or service, such as a bigger size or higher-end trim on a car.

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Photo by Markus Spiske from Unsplash.com

Setting a price just below a round number ($39.99 instead of $40) may lead consumers into thinking a product is less expensive than it really is – but it can sometimes backfire on sellers, a new study shows.

Researchers found that this “just-below” pricing makes consumers less likely to upgrade to a more expensive version of the product or service, such as a bigger size or higher-end trim on a car.

The just-below price that makes a product itself seem like a good bargain also makes the leap to the premium product seem too expensive, said Junha Kim, lead author of the study and doctoral student in marketing at The Ohio State University’s Fisher College of Business.

“Going from $19.99 to $25 may seem like it will cost more than going from $20 to $26, even though it is actually less,” Kim said.

“Crossing that round number threshold makes a big difference for consumers.”

Kim conducted the study with Joseph Goodman and Selin Malkoc, both associate professors of marketing at Ohio State.  Their research was published yesterday (Aug. 26, 2021) in the Journal of Consumer Research.

The threshold-crossing effect held for everything from coffee and face masks to streaming services to cars and apartments in seven different experiments, Goodman said.

“We found this effect works in experiential categories, as well as products. It replicated very consistently,” he said.

In one field study, the researchers set up a coffee stand on the Ohio State campus for two days, rotating the prices regularly.  About half the time, they offered a small coffee with a “just below” price of 95 cents or a larger cup upgrade for $1.20. In order to choose the upgrade option, customers had to cross that $1 round-number boundary.

Roughly every hour, they changed the price of the small cup to $1 and increased the price of the larger cup by 5 cents to $1.25.

While the larger cup was now more expensive than before, so was the smaller cup. Critically, both prices were on the same side of the $1 boundary, which the researchers predicted would make customers more likely to choose the upgrade.

How did customers respond?  Well, 56% of them upgraded to the larger cup when they didn’t have to cross the round-number boundary to upgrade ($1 to 1.25). But only 29% did when the smaller cup was at the just-below price of 95 cents and they had to cross the $1 threshold for the larger cup.

“In other words, we sold more of the large coffee when it was objectively more expensive than it was earlier ($1.25 vs. $1.20),” Malkoc said. “It was amazing how increasing prices – from a $1.20 to $1.25 – actually increased sales. It is a testament to how strong the effect was.”

The effect also worked for larger purchases with multiple upgrade options, findings showed.

In one study in the lab, college students were more likely to say they would choose a more expensive car and apartment option when the base price was just above a round number rather than just below.  That included scenarios where participants had multiple upgrades to choose from.

These findings fit in well with studies that have found threshold-crossing effects in other parts of life, Kim said.

“Research has shown that going across a state boundary makes a destination seem farther away,” Kim said.  “It is crossing that threshold that makes a difference. In our studies, the round number is like the state boundary, magnifying the perception of a difference in price.”

One reason that this effect works so well is that people often don’t have a good idea of what the “right” price of a product or service should be, Goodman explained. So consumers look for some context to help understand if what they’re buying is expensive or inexpensive.

“For many of the things we purchase, price is perceptual.  We have a feeling about whether the price is right or not,” Goodman said.

“In our study, people often said an upgrade purchase seemed less expensive when the base price was above the round number, even though it was objectively more expensive.”

There are some conditions where the threshold-crossing effect doesn’t happen.  One is for small price differences on expensive items.  It also doesn’t work on people who are familiar with prices for a product or service – for example, those who book hotels on a regular basis.

People who know prices well aren’t affected because they don’t rely on their perceptions, as many of the participants in this research did, Malkoc said.

“As consumers, we need to realize that our perceptions are often flawed.  We need to rely on actual numbers and not just our sense of what the numbers are,” she said.

Strategies

Renting out your place? Human connection key to a successful holiday rental

Warmth, friendliness and a sense of belonging, or the “homely” side of the experience, strengthen guest loyalty, making them more likely to return to the same host. However, these feelings alone didn’t necessarily make guests more likely to recommend the property to others.

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Striking up a connection with the property host is the factor that drives repeat bookings on holiday accommodation platforms such as Airbnb.

This is according to a new study, carried out by universities in the UK and Iran and published in the February 2026 edition of International Journal of Hospitality Management, that suggested that quality and value of accommodation also play a part in guest satisfaction, but personal connection is key to people deciding to stay again.

The research analyzed hundreds of online guest reviews and conducted in-depth interviews to understand what shapes guests’ evaluations of their stays in what is known as “peer-to-peer accommodation”.

Conducted over six years, the study shows that guests assess their stays using emotional cues such as warmth, atmosphere, and aesthetics; and cognitive cues such as cleanliness, safety, and convenience.

The study found that warmth, friendliness and a sense of belonging, or the “homely” side of the experience, strengthen guest loyalty, making them more likely to return to the same host. However, these feelings alone didn’t necessarily make guests more likely to recommend the property to others.

In contrast, affective and intellectual experiences – the enjoyment and perceived value of the stay – were stronger predictors of recommendations and positive reviews.

The research also examined how the quality of booking websites, such as Airbnb’s platform, influences guest behaviour. Although the website didn’t change how guests felt about the property itself, a well-designed and trustworthy site directly boosted guest loyalty and word-of-mouth.

Co-author Nektarios Tzempelikos, Professor of Marketing at Anglia Ruskin University (ARU), said: “Guests think carefully about both emotional and practical aspects before booking. Hosts who focus only on one side – either charm or functionality – may be missing the bigger picture.

“Platforms like Airbnb thrive when they’re designed for trust. Guests return to sites that are clear, reliable and easy to use. But it’s not just about tech, it’s about people. The most memorable stays come from warmth, authenticity and genuine local connection.

“By encouraging friendly, personal communication between hosts and guests, and balancing smart technology with a human touch, platforms can create experiences that feel less transactional and more meaningful.”

The study was carried out by researchers from Brunel University, University of Bradford, Newcastle University, Anglia Ruskin University and the University of Tehran.

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BizNews

In-aisle store displays might crowd shoppers and reduce overall sales

Retailers might seek strategies to boost product exposure without also increasing crowding – especially for cart shoppers who may experience greater crowding effects – and that excessive use of in-aisle fixtures will likely dampen sales at the aggregate level rather than increasing it. 

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In a study involving a real-world grocery store, in-aisle displays meant to boost product visibility were in fact associated with reduced sales and purchase-related behaviors, with results amplified for shopping cart users.

Mathias Streicher of Austria’s Department of Management and Marketing presents these findings in the open-access journal PLOS One.

Retailers often place extra product displays directly in aisles in an effort to boost visibility and enhance sales. However, in-aisle displays could increase spatial crowding, which occurs when people feel restricted in their freedom of movement and has been linked with purchase-avoidance tendencies. To help clarify if in-aisle displays result in more purchases, Streicher conducted several experiments with a partnering grocery store.

First, they tracked weekly sales for an aisle containing household, baby and pet staples over a six-week period during which five product-display stands were placed mid-aisle. The stands were then removed for six weeks. Comparison of sales data showed that in fact, sales increased after removal of the in-aisle displays, with the average weekly percentage of total store revenue from that aisle rising from 4.33 to 4.83 percent.

A second in-store experiment in the same aisle showed that people using shopping carts also stopped and physically handled products—behavior previously linked with sales—about 7.05 times more often when in-aisle displays were absent than when they were present. Non-cart shoppers also touched products more often when displays were removed, but the effect was smaller (3.81 times).

Finally, in an online experiment, 200 participants imagined using a shopping cart or basket while viewing photographs of the same aisle from the in-store experiments, with or without in-aisle displays. They tended to rate the aisle with displays as more crowded and reported lower levels of perceived control for aisles with displays than those without, with effects amplified for imagined cart versus basket use.

Together, these findings suggest retailers might seek strategies to boost product exposure without also increasing crowding – especially for cart shoppers who may experience greater crowding effects – and that excessive use of in-aisle fixtures will likely dampen sales at the aggregate level rather than increasing it. 

Further research could address some of this study’s limitations, such as by considering the effects of human crowding, promotional offers on products, and seasonal influences on shopping behaviors.

Streicher adds: “The research shows that adding merchandise into store aisles can actually reduce overall sales by making the environment feel crowded and harder to navigate. Importantly, this negative effect is even stronger for shoppers using carts, as they experience greater spatial constraints and reduced control while shopping.”

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BizNews

Structure of online reviews shapes their helpfulness

Reviews that grow increasingly positive are most helpful to readers, while those that turn negative are least helpful. For average-rated products, progressively negative trajectories enhance helpfulness, whereas reviews that start negative and grow positive are least effective.

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A study of nearly 200,000 Amazon reviews shows that the usefulness of online product reviews depends not only on what is said, but on how the information is structured.

The researchers, from the Universities of Cambridge and Queensland, studied Amazon reviews for products ranging from clothing to food to electronics. They found that how the information is organised matters as much as what is said, and that different review structures are more or less helpful, depending on how highly the reviewer has rated the product.

Their results, published in the journal Scientific Reports, could help companies and third-party review platforms design their review pages to prompt the sort of reviews that will be most helpful to potential customers.

For example, a reviewer assessing a laptop might praise its performance and design while criticising its battery life, so how should such information be structured to be most useful to the reader? Should the review begin with criticism and end on a positive note, or start positively before turning to drawbacks?

“Any target of evaluation typically has both positive and negative aspects, which makes crafting evaluative messages challenging,” said co-author Dr Yeun Joon Kim from Cambridge Judge Business School. “The key question is how to structure these elements within a single message. For example, one might present criticism upfront and then move to praise, or instead integrate negative points within an otherwise positive evaluation. Yet research has paid little attention to this structural dimension.

“We wanted to understand whether certain structures are consistently more effective, or whether their effectiveness depends on the performance of the target being evaluated.”

The study was based on 195,675 reviews of 5,487 distinct products, and assessed performance and related factors, and a helpfulness score as measured by reader votes.

The researchers identified nine possible structures of online reviews ranging from Type A reviews that start positive and become more positive as they go along, to Type I reviews that start negatively and become even more negative – with lots of variance in between.

For highly-rated products, reviews that grow increasingly positive are most helpful to readers, while those that turn negative are least helpful. For average-rated products, progressively negative trajectories enhance helpfulness, whereas reviews that start negative and grow positive are least effective. For low-rated products, reviews are judged most helpful when they open constructively before introducing criticism.

“The results are nuanced but very clear,” said co-author Dr Luna Luan from the University of Queensland, who carried out the research while earning her PhD at Cambridge Judge Business School. “Looking at the overall sentiment of reviews does not fully translate into message effectiveness. It is the broader structure of sentiment – how positivity and negativity evolve throughout the review – that shapes how readers interpret online reviews.”

“Our findings have practical implications for how platforms and companies can design review pages in order to elicit the sort of reviews that will be most helpful to readers based on how highly products are rated,” said Kim. “For example, instead of simply asking ‘Write your review here’, the online review form could instead include micro-prompts that guide how reviewers structure feedback in a way recipients find most helpful.”

The researchers found the most commonly used review styles are not necessarily the most helpful to readers. In particular, for average- and low-rated products, the structures that reviewers tend to adopt often differ from those that readers find most useful.

This mismatch likely reflects different underlying motivations. Reviewers are not always writing to maximise usefulness for others, but may instead be expressing their own experiences, frustrations or emotions – especially when evaluating products of moderate or poor quality. As a result, review writing often serves both as information sharing and as a form of self-expression. This helps explain why widely used review styles do not always align with what readers perceive as most informative or helpful.

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