New research shows a one penny difference is more influential than many shoppers may be willing to admit.

Marketing professors David Sprott, from WSU, and Ken Manning, from Colorado State University, are publishing this finding in the Journal of Consumer Research this fall, according to a WSU news release.

The pair conducted several studies during the last three years using WSU undergraduates, Manning said. The results showed that consumers process the left-most digit of a price more than the right digits.

In one experiment, the undergraduates filled out simple questionnaires about which of two products they would purchase, Sprott said. The questions had pictures and descriptions much like they would in a store.

“It’s interesting – you get such shifts in behavior in such simple circumstances,” he said.

One example gave students the options of two pens. In the first situation, one pen was $1.99, and the other was $3, Manning said. In this situation, 82 percent of students said they would buy the lower-priced pen.

In the second situation, the researchers changed the pens’ prices by one penny to $2 and $2.99. The researchers hypothesized that because the left-most digits were the same, though the price difference was still $1, fewer people would buy the less-expensive pen, Manning said. They were right – 56 percent of students said they would buy the lower-priced pen.

In another example, the first situation had two items at $29.99 and $39.99, and the second situation had the same two items priced one penny more at $30 and $40. Because the percent of the increase from 20 to 30 is greater than from 30 to 40, more people again chose the lower-priced item in the first situation than the second, Manning said.

The conclusion of the studies is that the perceived difference between prices is due strongly to the difference between the left-most digits in the prices, Manning said. This perceived difference can increase or decrease consumers’ price sensitivity or their concern about the amount of money they’re spending, therefore influencing their purchases.

Some studies also showed consumers were influenced by who they were buying for, Sprott said. Students buying products for themselves or acquaintances were more likely to buy the lower-priced item than if they were buying for a close friend.

Sprott and Manning’s research has implications for both retailers and consumers.

“Retailers can nudge people to a higher-priced item if that is more profitable for them, or they can nudge the consumer to the lower-priced item if that is more profitable for them,” Manning said.

Retailers might want to maximize left digit differences in the case of store brands that are more profitable for a store than national brands, Sprott said. Conversely, for societal or political reasons, retailers might want to minimize perceived price differences in the cases of organic foods or energy-efficient light bulbs.

Their studies show retailers how they can potentially shift consumer purchases, Sprott said. It can also have implications for consumers.

“I think it points to the fact that people need to be as attuned as possible to small changes in their environment,” Sprott said.

Sprott said he encourages consumers to pay attention and carefully consider their purchasing decisions.

This mindset can be used to justify purchases to ourselves, Sprott said. Consumers should remember that a $29,999 car is a $30,000 car not a $20,000 car, he said.

Sprott and Manning first met in the doctoral program at the University of South Carolina, then continued their relationship while Manning was at Gonzaga University and Sprott was at WSU. The researchers were able to continue working together after Manning moved to Colorado, Sprott said.

The researchers next plan to study the benefits of simplifying pricing and consumers’ positive reactions to round numbers in prices, Manning said.