When children confront prices: an approach based on price - - PDF document

When children confront prices: an approach based on price presentation

Coralie Damay

Department of Marketing, ISC Paris, Paris, France

Nathalie Guichard

Department of Marketing, Universite ´ Paris 1 Panthe ´on-Sorbonne, Paris, France, and

Ame ´lie Clauzel

Department of Marketing, Universite ´ Paris Est – Universite ´ Evry Val d’Essonne, Evry, France

Abstract Purpose – This paper seeks to examine how young consumers attribute and select product prices according to their presentation (i.e. format and ending). Design/methodology/approach – A questionnaire, administered to a sample of children between six and 12 years of age, reveals that children’s allocation of prices and children’s choices depend on different price formats (i.e. non-decimal versus decimal prices and varied price endings). Findings – Children tend to prefer round prices and to choose a 0-ending in the decimal portion of decimal prices. However, their preferences also depend on their position as either a salesperson or a buyer. Originality/value – Research into the relationship between children and price is a relatively new field. This study uses recent works as a basis and extends the field with new insights. Keywords Children (age groups), Decimal prices, No-decimal prices, Price endings, Buyers, Salesperson, Young consumers, Price positioning Paper type Research paper Although price was once the unloved variable in the marketing mix (Maxwell and Estelami, 2006), its status has recently changed. In modern contexts marked by increased competition, price has become decisive for both business and consumer behaviour. A revival of interest in this variable is widespread, across both business and academic fields, and research has examined the role of prices in purchase decisions (e.g. Biswas and Blair, 1991; Urbany et al., 1988), customer knowledge (Dickson and Sawyer, 1990; Gabor and Granger, 1964), and even changes in consumers’ purchasing behaviour (Ginzberg, 1936; Gue ´guen and Legoherel, 2004). Researchers also have regarded social status, age, and gender as determinants of price comparisons (Abramovitch et al., 1991; Donohue, 1975; Gabor and Granger, 1961). Yet research related to child consumers and the “price factor” remains scarce. Knowledge of prices is not innate but rather develops through a process that begins early in a consumer’s life. Therefore, it is legitimate to investigate children’s learning of prices, which serves as a basis for their adult abilities. Since the 1970s, children have been a main target for marketing and related research. Early studies focused on their socialisation processes (Ward, 1974) and their influences, as well as their decision power (John, 1999; McNeal, 1992). In turn, researchers have found that children have an unquestionable effect on the family’s economic decisions (Bo ¨cker, 1986; Filiatrault and Ritchie, 1980; Foxman and Tansuhaj, 1988; Jenkins, 1979; John, 1999; McNeal, 1969, 1992). Even young children have real purchasing power (Le Marketing Book Juniors, 2006) and vast choice possibilities. Thus, it is relevant to investigate their purchasing process, as both decision makers and real consumers who are faced with different marketing strategies, including price-based efforts. This exploratory research therefore examines child consumers’ responses to and preferences for price-oriented marketing practices, which vary according to the format (non-decimal versus decimal) and ending of the price. Our theoretical framework revolves around three aspects. First, we investigate the role of price and price knowledge in the act of purchase. Second, we focus on the child as an economic actor. Third, and finally, we discuss the influence of the presentation of a price on perception and demand.

• 1. Theoretical and empirical foundations

Before analysing the influence of price presentation on child consumers, we establish their role in the purchasing process in

• general. Therefore, we examine the impact of price format

and endings in children’s purchasing decisions. 1.1 Role of prices in the purchasing process and consumers’ price knowledge During a purchase decision, a consumer assesses alternatives according to various factors, including price (Gabor and Granger, 1964; Monroe and Lee, 1999). The price helps consumers make comparisons between proposed products (e.g. “That product is more expensive than this one”) and subjective inferences, often about the product’s quality (Erickson and Johansson, 1985). As they learn about price,

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consumers develop an internal reference price (Briesch et al., 1997; Monroe, 1979), but there is a paradox: consumers attach great importance to price for purchasing decisions despite relative price unfamiliarity (Dickson and Sawyer, 1990; Estelami and Lehmann, 2001; Gabor and Granger, 1964). Exogenous variables and certain consumer characteristics, such as memory deficiencies, may explain these findings (Dickson and Sawyer, 1990; McGoldricks and Marks, 1987; Vanhuele and Dre `ze, 2002). For example, people may retain a conscious memory of certain, significant information (Vanhuele et al., 2006) but ignore knowledge that has been stored unconsciously in implicit memory in decision- making tasks (Estelami and Lehmann, 2001). Vanhuele and Dre `ze (2002) suggest three ways to assess consumers’ actual price knowledge: 1 Price recall. The consumer knows the current price of the product (Urbany and Dickson, 1991). 2 Price recognition. The consumer can tell if a price is the usual or memorised price, as an assisted but not spontaneous memory (Monroe et al., 1986). 3 Relative price knowledge. The consumer can place the price in an appropriate range. Consumers often do not know prices exactly and score poorly

• n recall measures. Yet most consumers can recognise a price

and demonstrate approximate and relative knowledge of it. 1.2 Children as economic agents Children are real actors in the economy. They participate by using money they receive from various sources (pocket money, allowances, or one-off gifts). The sum of money received as a gift often exceeds that given as pocket money (Furnham, 1999) and represents a significant sum to the child, whether spent or saved. Children’s pocket money has been the subject of various studies (e.g. Furnham, 1999; Marshall and Magruder, 1960; McNeal, 1987). This money allows children to become consumers in their own right and to learn the buying process. Thus, for example, research has focused primarily on children’s knowledge of retail outlets (McNeal, 1969, 1987; Reece, 1986); these are, in effect, where children observe and learn (McNeal, 1992). At the same time, from the age of eight, children are aware that the price of a product may differ depending on the point of purchase (McNeal and McDaniel, 1981). Studies have also focused on how children learn the rules of monetary transactions (Berti and Bombi, 1988; Fox and Kehret-Ward, 1985, 1990; McNeal, 1992; McNeal and McDaniel, 1981; Rippel and Smith, 2003) and economic concepts (Burris, 1983; Danziger, 1958). In particular, they have examined how children perceive the prices offered by

• sellers. Various results highlight the cumulative stages in the

acquisition of the concept of money and in learning the meaning of money (Furnham and Argyle, 1998; Marshall, 1964; Marshall and Magruder, 1960; Strauss, 1952). The few authors who have considered price effects on children’s buying processes (Donohue, 1975; McNeal, 1992; Schwentner, 1980; Stephens and Moore, 1975; Turner and Brandt, 1978; Ward et al., 1977) do not agree on the role of the price factor. Their results regarding children’s price knowledge also differ. Certain prior work on children’s learning about prices mainly relies on numerical cognition. Prices consist of figures, and visual characteristics resonate with young children (Damay, 2008). Therefore, price is first characterised by its appearance as numbers. According to Piaget and Inhelder (2003), children gradually acquire the ability to coordinate different dimensions as they move into later cognitive development stages. A young child first focuses

• n the perceptual dimension and categorises information

according to physical aspects (e.g. size, colour) (Piaget, 1952; Saltz et al., 1972). Children between seven and 12 years of age enter the “concrete operational stage,” characterised by the emergence of complex operations in which processing and categorisation become more refined. These children consider many factors and different natures of the objects (i.e. perceptual, functional, and abstract) (Bahn, 1986; John and Sujan, 1990; Piaget, 1976; Ward et al., 1977). According to Fox and Kehret-Ward (1990), primary school children focus

• n the perceptual characteristics of products, price being one
• f these characteristics. As they grow up, functional attributes,

such as quality, serve as a basis to evaluate prices. Thirteen- year-olds have a more abstract mode of reasoning; contextual attributes prevail. They believe that prices are based on the quality of materials used, the preferences of potential buyers, and the usefulness of the product. Therefore, very young children consider the appearance of prices, and then with age, their definition of prices becomes more precise and more abstract. However, figures constitute prices, which means that prices provide certain information to the consumer, particularly with regard to the value of the product. 1.3 Influence of price presentations on consumer perception and demand Studies that consider price presentation consist of two main themes[1]: the frequency of certain endings and the psychological effects on consumers’ memory and demand. Because of the paucity of research on prices and children, this review features research with adult consumers. In particular, research shows an overrepresentation of price endings with 0, 5, and 9 (Friedman, 1967; Kreul, 1982; Rudolph, 1954; Schindler and Kirby, 1997; Twedt, 1965; Wisniewsky and Blattberg, 1983), with some variation according to product category and price level (Liang and Kanetkar, 2006). In price recall tasks, price presentation clearly has an effect. Schindler and Wiman (1989) show that people make more mistakes when the price ends with 9 rather than 0. Furthermore, respondents tend to remember more prices ending with 0 in recall tasks. Gue ´guen and Legoherel (2004) also indicate that consumers only memorise the integer part of the price. The numerical line concept[2] (Dehaene and Marques, 2002) attempts to explain such approximations and rounding: people treat numbers with an automatic process in which they consider the number in its entirety and then change it into an approximate quantity by assigning it, quasi continuously, to a numerical line in logarithmic form (Dehaene, 1992; Dehaene et al., 1993; Duncan and McFarland, 1980). Two effects result from this numerical line form: 1 A distance or amplitude effect. For numbers with one or two digits, the time it takes to identify the larger number decreases as the distance between them increases, for example, 80 compared with 99 and 81 compared with 82 (Dehaene, 1992; Moyer and Landauer, 1967). 2 A magnitude or minimum-difference effect. When two numbers are equally different, it is more difficult to identify which is the larger of the pair when the numbers

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are large, for example, 10 compared with 20 and 80 compared with 90. Large numbers appear subjectively

• closer. This observation is consistent with the idea of

compressible encryption (Banks and Hills, 1974; Moyer and Landauer, 1967; Sekuler and Mierkiewicz, 1977). These effects explain why larger numbers are represented less precisely than smaller ones (Dehaene and Marques, 2002). It is also possible to observe an automatic reaction in children to the magnitude of the number (Berch et al., 1999; Chillier, 1999; Girelli et al., 2000; Rubinsten et al., 2002). Children’s mental line is qualitatively similar to that of adults but quantitatively different. That is, children’s numerical line is more compressed than that of adults (Huntley-Fenner, 2001; Sekuler and Mierkiewicz, 1977; Todd et al., 1987). At the same time, during the purchasing process, the prices the consumer sees are shown as Arabic numerals. This price information may be encoded in different ways, either in nominal form (e50) or as a subjective value (expensive or cheap). The number acquires a meaning (Dehaene, 1996) that engages various cognitive processes (Monroe and Lee, 1999). For prices, it is the magnitude of the number that seems to be predominantly used, and the ordinal properties of the number are paramount. With this as a starting point, consumers will tend to make approximations. The effects of price presentation on demand (e.g. sales, intentions to buy) are less clear (Ginzberg, 1936; Liang and Kanetkar, 2006; Wagner and Beinke, 2006). Schindler and Kibarian (1996) show that a 99-ending price increases sales more than a 00-ending, whereas an 88-ending produces no significant difference. Harris and Bray (2007) assert that age does not affect people’s propensity to use odd prices. However, numerical cognition research may partly explain the impact of price presentation on perceptions, including the association people make between a price ending and a product image (Schindler, 2006). A 0-ending is simple to retain and thus might create a positive image, which makes it a reference price, whereas a 9-ending can cause consumers to regard the price as lower than expected (Liang and Kanetkar, 2006; Schindler and Kirby, 1997). According to Hawkins and Hoch (1992), consumers thus associate a 9-ending with a sale. Yet no research has clearly focused on the influence of price presentation on children’s perceptions, even though visual representations are particularly relevant for children. Therefore, we base the proposed hypotheses on research conducted with adult consumers and the knowledge resulting from it.

• 2. Research hypotheses

Given the small amount of previous work on the topic, our research has an exploratory purpose. This exploratory approach leads to the formulation of tentative research hypotheses that constitute the starting point for empirical

• tests. With respect to these hypotheses, inductive reasoning

enables us to develop a deductive approach that gives a hypothetical-deductive flavour to the epistemological position

• f this research. We present the hypotheses in the form of two

research proposals, each of which is broken down into three sub-hypotheses.

When children learn mathematical skills, such that they

engage in more frequent manipulation of figures, the process

• f gathering

information from prices becomes easier. However, children’s mathematical knowledge and cognitive capacities remain limited, and therefore they should prefer non-decimal prices to decimal prices because the cognitive task of price processing (information treatment but also memorisation) becomes more complex for decimal prices as a result of a larger amount of information (Baron et al., 1975; Chi, 1976, 1977, 1978; Chi and Klahr, 1975; Schaeffer et al., 1974). Finally, studies on the memorisation of number sequences reveal that numbers at the beginning and the end of a list are better retained (the recency effect). Furthermore, culture has a significant influence on the way people remember numbers. Studies on eye movement demonstrate that the direction text is read (e.g. left to right) determines the importance placed on the digit (e.g. the first digit). Marketing research has also found that consumers tend to ignore or give insufficient weight to the right-most digits of prices (Thomas and Morwitz, 2005). These results suggest that children will tend to choose round or truncated prices when asked. Nevertheless, we believe that the higher the education level of the child (which strongly correlates with mathematical skills), the weaker this trend will be because of a greater mastery of numbers, particularly decimal numbers. In addition, the tendency to opt for non-decimal prices likely decreases as the child’s awareness of price increases. In other words, the more the child knows about price, the less he or she will resort to non- decimal prices. Finally, for exploratory purposes, we assume that the price of the product influences the tendency to opt for the non-decimal format. In general, the price of a cheap product is often more precise (i.e. uses a decimal) than that of a more expensive product. At the same time, the concept of the numerical line represented in logarithmic form engenders a more approximate representation of large numbers (Dehaene, 1992, 1996; Duncan and McFarland, 1980; Moyer and Landauer, 1967). Therefore, the tendency of children to opt for a non-decimal price should be lower for the most expensive products in the study: H1. Children opt for non-decimal prices depending on (a) education level, (b) price knowledge, and (c) price level. As a result of their less developed cognitive capacities, children should favour 0-endings because they are easier to process when prices are in decimal format. Decimals are complicated to understand and manipulate, especially for younger children. A 0-ending for decimal prices offers a way to simplify the price (e12.90 versus e12.97). Although various models of cognitive psychology plot how people mentally represent numbers, we use the influential model that Dehaene (1992) proposes. It consists of the verbal code (the number is represented by an organised sequence of phonemes), the visual code (the number is spatially represented in its numeric form), and the approximate code (the number is an approximate amount). With regard to price, this last code is particularly important because it allows the number to acquire a meaning (Dehaene, 1996). If this is the case, a 0- ending is favoured or, to a lesser extent, a 5-ending. Hypothesis 1 posits that three variables likely affect this trend. As children’s education level increases, their competence in mathematics should logically improve, and their tendency to opt for endings other than 0 should

• increase. Similarly, a better knowledge of prices should lead

them to be more precise in their suggestions and to rely less

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• n numbers ending in 0. In addition, because of the

logarithmic form of the numerical line and the use of approximations, the highest prices should more frequently end in 0: H2. Children opt for 0-endings in the decimal portion of decimal prices depending on (a) education level, (b) price knowledge, and (c) price level.

• 3. Research method

An administrated questionnaire provides a methodological approach that matches the research objectives and should produce a relatively large sample size, in support of external validity (Harris and Bray, 2007). This developed questionnaire consists of two sections. The first section asks the children[3] to provide ideal selling prices for a different set

• f six pictured products. These items reveal the respondents’

inclination for non-decimal versus decimal prices and their preferred endings, as well as their price knowledge. In the second section, children choose the prices of different products from among a set of proposed prices in two stages. First, from among four prices[4] (two non-decimal and two decimal; see Table I), the children choose the one they would be willing to spend to buy six pictured products. Second, they choose among six decimal prices[5] (two with 0-endings, two with 5-endings, and two with 9-endings) to assign the purchase price of six other products (see Table II). To enhance its internal validity, the study presented many versions of the same questionnaire. The order of the sections varied, as did the product presentation order in each task, and the order of the proposed prices changed several times. Moreover, the young respondents knew all the products that appeared in the study, as confirmed during a pre-test. The varying tests required 18 products. For the products used during the tests, three criteria were critical: the product recipient (i.e. child, family, or a parent), a certain price range (under 10e, over 10e), and the nature of the product (food versus not food). Nine of the selected products used single- figure prices (in euros), and nine had double-figure prices, though none of the prices exceeded 30 euros, to correspond to a consistent value scale that children could manipulate (Table III). The pre-test included 15 students from four primary school levels, who confirmed its adequacy in terms of matching the children’s cognitive capacities (i.e. understanding the tasks and having the capacity to conduct them). The questionnaire development prioritised visuals and made systematic use of colour pictures. The questions and instructions featured language similar to that used in schools. The pre-test suggested a few minor format changes. For the main study, children filled in each questionnaire individually in class. The task took an average of ten minutes. An author was present in each class to answer any questions. Because we used several versions of the questionnaire, it was not possible for the administrator to read the document out loud to the classes. The participants included students in different schools throughout Paris and the surrounding

• region. The final sample consisted of 224 primary school

children six to 12 years of age (Table IV), which corresponds to Piaget’s concrete operational stage (Piaget and Inhelder, 2003). Therefore, the respondents should have acquired certain prerequisite skills (i.e. reading and calculating) and be capable of relatively complex operations, for which they use different levels of analysis (perceptual, functional, and cognitive). In addition, this age segment likely has come in contact with prices, as either an observer or a purchaser.

• 4. Research results

4.1 Children’s trend to mainly opt for non-decimal prices To determine whether children are more inclined to opt for non-decimal than decimal prices, this study considers two Table I Proposed non-decimal and decimal prices 15% 25% Real prices Decimal Non-decimal Decimal Non-decimal Chocolate candies 2.51 2.64 3 2.38 2 Chocolate bar 1.46 1.53 2 1.39 1 Adult shampoo 4.90 5.15 5 4.66 4 Box of felt-tips 26.80 28.14 19 25.46 17 Cake tin 15.50 16.28 16 14.73 14 Flowers 26 27.30 27 24.70 24 Table II Proposed decimal prices Price ending 5 9 5 9 Real prices Most expensive Least expensive Child’s shampoo 2.95 3.10 3.05 2.99 2.90 2.85 2.89 Bottle of milk 1.99 2.10 2.05 2.19 1.90 1.95 1.89 Cleaning wipes 2.09 2.10 2.15 2.19 1.90 2.05 1.99 Child’s tennis racket 12.9 13.10 12.95 12.99 12.80 12.85 12.89 DVDs 29.99 30.10 30.05 30.09 29.90 29.95 29.89 Perfume 29.50 29.60 29.55 29.59 29.40 29.45 29.49

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cases: when the child is a salesperson and when he or she is a

• buyer. In the first case, a salesperson situation, we asked the

children to attribute a price to six products (for which they had a picture): one packet of cereal bars, four fruit yoghurts,

• ne pack of coffee, one backpack, one toaster, and one bottle
• f champagne[6]. As Table V shows, children’s tendency to
• pt for non-decimal prices emerged when they took a sales

perspective, but this occurred only for high-priced products. Another test required the children to choose a buying price

• ut of four options (two non-decimals, two decimals) for six
• products. Unlike the previous task, this choice involved a

constrained set. To set up the test, we subjected the regular price (which often featured decimals) to a variation of ^5 per cent and then rounded these two prices to nearby prices (increased and decreased). The resulting four prices provided an even number of options, which avoided any choice taking a central position, because a centrally located choice often

• ffers a safe option for indecisive children. As Table VI shows,

the significant results confirm that the children were more willing to choose non-decimal prices than decimal prices. 4.1.1 Tendency to choose round prices depends on education level We propose that the education level (in particular, mathematical competence) affects the tendency of children to opt for a non-decimal price (see H1a). The underlying hypothesis is that the higher the education level, the less children will choose to use non-decimal prices. Thus, we compared the proportions of non-decimal prices chosen at each grade level on the two tasks: price determination and limited choice between two round prices and two prices expressed as a decimal. For the price determination task, the results show a clear difference between the lowest grade level (CE1) and others, but not in the expected direction. Instead, children at this level opted for round prices less frequently than their elder counterparts, regardless of the product (Table VII). On the contrary, children at higher levels showed a greater tendency to choose a non-decimal price, which helps validate H1a. In the absence of a qualitative study, these results are surprising and difficult to understand. A possible explanation could be that because children in higher grades are more confident in their knowledge of prices, they tend to give a product an approximate price, which would result in more round prices. Conversely, younger children, who are less comfortable with price knowledge, try to give the most accurate price possible (perhaps because of the effect of social desirability) and therefore suggest decimal prices. However, in the task of choosing a price from a limited set, the results are inconclusive. In other words, the proportion of round prices does not vary as a function of grade. The results are also not significant. This first finding highlights the importance of the way the question is presented. 4.1.2 Tendency to choose round prices depends on price knowledge We hypothesised that the level of price knowledge affects the tendency to use round prices. Specifically, we propose that the Table III Products for price tests Price level Recipient: child Recipient: family Recipient: third party Price attribution testa Under e10 1 packet of cereal bars 4 fruit yoghurts 1 pack of coffee Over e10 1 backpack 1 toaster 1 bottle of champagne Price choice from a limited setb Under e10 1 pack consisting of 5 packets of chocolate candies 1 chocolate bar 1 shampoo for adults Over e10 1 box of felt tip pens 1 cake tin 1 bouquet of flowers Price choice from a limited setc Under e10 1 shampoo for children 1 bottle of milk 1 packet of cleaning wipes Over e10 1 child’s tennis racket Box of dvds 1 bottle of perfume Notes: aSix products (all hypotheses); bsix products, two with decimal prices and two with non-decimal prices (H1a-H1c); csix products with decimal prices (H2a- H2c) Table IV Sample characteristics Class (Age bracket; average age) CE1 CE2 CM1 CM2 Gender (6-9; 7.4) (7-10; 8.1) (8-12; 9.3) (8-11; 10.1) Total Boy 21 43 31 34 129 Girl 13 33 19 30 95 Total 34 76 50 64 224 Note: In line with the hypotheses tests, we modified the sample through paired deletion, that is, retaining for every calculation only respondents whose answers were complete for the relevant variables Table V Allocation of sale prices for six products by children: non-decimal versus decimal prices Unit price Price for ten Cereals bars Yoghurts Coffee Champagne Backpack Toaster Decimal prices (%) 47.2 49.1 44.5 41.3 32.4 29 Round prices (%) 52.8 50.9 55.5 58.7 67.6 71 Total (100%) 2 n valid 214 214 209 213 213 214 p 0.412 0.785 0.112 0.011 0.000 0.000

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greater their price knowledge, the more accurate children are when determining prices (i.e. greater use of the decimal format). To assess this knowledge, we used the question that puts the child in the position of the seller and asks them to determine the prices of six products (Table III). For each product, the absolute value of the relative error (the difference between the price given in response and the real price) is

• calculated. In the six cases, we calculated the median of the

relative errors. In this way, we created two equally sized groups – half above and half below the median[7] (Table VIII). The results presented in Table IX show that a greater

• verall proportion of round prices were given by children with

less price knowledge, although the differences are only significant for two products (cereals and coffee). At the global level (aggregating all products), greater price knowledge leads to a reduced tendency to round prices (p ¼ 0:0205). Even so, whatever the level of price knowledge, round prices are still the preference of the majority of the sample. These results validate H1b. However, in the task of choosing a price from a limited set, the greater the price knowledge[8], the more frequently the child chose round prices. This result occurred when the child was in the position of the buyer and therefore is opposite to the result when the child was in the position of the seller. Specifically, although the tendency to use round prices was predominant in both tasks, the effect of price knowledge did not manifest in the same direction. This result may have different causes, as follows:

.

in the second task, knowledge and the tendency to use round prices were measured using different products;

.

the child’s position changed according to the nature of the task (buyer or seller); and

.

the nature of the task differed in both cases (price determination and choosing from a limited set). For these reasons, it is difficult to determine in which direction the hypothesis can be validated. 4.1.3 Tendency to choose round prices depends on the price of the product We provide two explanations for the effect of the price level of products on children’s tendency to choose round prices. First, we observe prices with decimals more frequently for products sold in single units than for products sold in multiple units of ten[9]. Second, because children do not typically manipulate large numbers, we expected that the price they suggested would be more general and less accurate, resulting in a greater use of round numbers. Table VI Choice of one non-decimal versus decimal price for six products from a limited set Chocolate candies Chocolate bar Adult shampoo Felt tip pens Cake tin Flowers % of non-decimal prices 61.2 50.9 62.4 69.4 68.7 70.2 % of decimal prices 38.8 49.1 37.6 30.6 31.3 29.8 n valid 219 218 218 219 217 218 p 9.80E-04 0.8927 2.72E-04 1.08E-08 4.41E-08 2.98E-09 Table VII Round price proportion depending on education level in the task of allocation of sale prices for six products by children Cereal bars Yoghurts Coffee Champagne Backpack Toaster CE1 (%) 37.50 43.80 34.40 34.40 38.70 48.40 CE2 (%) 56.30 59.20 59.70 52.90 73.60 75.00 CM1 (%) 48.00 50.00 57.10 64.00 69.40 66.00 CM2 (%) 60.30 46.00 60.30 73.00 73.00 81.00 n valid 216 216 211 215 215 216 pa 0.0391 0.3015 0.0082 0.0020 0.0003 0.0052 Note: ap corresponds to a Z-test comparison of the proportions of CE1/CE2, CM1, and CM2 Table VIII Mean and median of relative mistakes in prices answers in the task of allocation of sale prices for six products by children n valid Average Median Backpack 215 0.6448 0.5932 Champagne 216 0.7325 0.6475 Cereal bars 216 1.9239 1.0179 Coffee 211 2.1928 0.6047 Yoghurts 216 2.4045 1.1676 Toaster 216 6.717 1.0185 Table IX Round price proportion depending on relative price knowledge in the task of allocation of sale prices for six products by children % non-decimal prices Cereal bars Yoghurts Coffee Champagne Backpack Toaster Total Good knowledge (%) 42.45 41.07 46.00 62.96 67.29 70.19 54.95 Less good knowledge (%) 62.73 61.17 63.96 54.21 67.59 71.43 63.59 n valid 216 216 211 215 215 216 215 p 0.024 0.103 0.020 0.372 0.933 0.571 0.0205

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This is indeed what we observed for both modes of questioning (limited and unlimited choice). In the first case (Table X), we found a greater proportion of round prices for both the cheapest and the most expensive products. At the same time, the proportional difference between round and decimal prices was significant only for the more expensive products (p ¼ 0:000). Nevertheless, tests of these proportions indicate a significant difference between the proportion of round prices for cheaper products and that of the more expensive products (p ¼ 0:000), which enables us to conclude that the more expensive the product, the more children opt for round prices. This result validates H1c. Analysis of results for the second case (limited choice from two round prices and two prices in decimal format) confirms that the majority of children chose round prices for all products and, following a test of the proportions, identifies a significant difference in the use of round prices depending on the price level of the products (Table XI). When the products were more expensive, children chose round prices more frequently (p ¼ 0:011). This result also validates hypothesis

• 1c. The validation of possible links between these different

variables does not show any relationship, except for that between the child’s price knowledge and the price level (p ¼ 0:00[10]): that is, the more expensive the product, the more accurately the child determined its price[11]. 4.2 Influence of price endings on children’s price attribution and price choices in the case of decimal prices Because of their limited cognitive capacities, children should prefer a 0-ending in the case of decimal prices because it makes the prices easier to discern. The test of H2 again pertains to two tasks. First, in the case of the price allocation task, we retained only the answers of the children who specified decimal prices[12]. These results unquestionably show that the 0-ending is the most frequently given for most

• f the products (Table XII).

In the second task, the children chose one price with varied endings for six products (two prices ending in 0, two ending in 5, and two ending in 9). For each product, the starting point is the real price, increased or decreased to obtain three prices lower than the real price (with three different endings) and three higher prices. The range never exceeded 10 per cent, and the permutations were conducted such that the same ending never appeared systematically on the same line, such as the highest price. As in the previous constrained test, there was an even number of options per product. To avoid an

• rder effect or position bias of the prices during the

administration

• f

the questionnaire, we divided the permutation into three portions. As Table XIII shows, the children clearly opted for a 0-

• ending. Endings in 0 were chosen significantly more

frequently for almost all products. Even among the most expensive products, the 0-endings dominated the children’s answers. These two tests partially validate H2. To refine these results, we tested the choice of 0-ending prices using three variables: education level, the child’s price knowledge, and the price level of the product. 4.2.1 Tendency to choose a 0-ending depends on education level We proposed that children at a lower education level are more likely to opt for a 0-ending because they use a heuristic

• simplification. Therefore, we re-tested hypothesis 2a on two
• tasks. For the first task, the results of the contingency tests are

not significant, and no scientific conclusions can be drawn. However, it seems that the higher the child’s education level, the less frequently he or she chose a 0-ending. Table XIV provides the results of the second task; however, the results do not allow us to conclude that education level influences the probability of choosing a 0-ending when prices are presented in decimal format. 4.2.2 Tendency to choose a 0-ending depends on price knowledge H2b assumes that price knowledge influences the use of a 0-

• ending. Specifically, we proposed that the greater the price

knowledge, the less frequently the child would choose a 0- ending. For the price allocation task, the results (Table XV) indicate no correlation between behaviour, in terms of the endings chosen, and price knowledge (as previously calculated from the median of relative errors). In only one category (cereal bars; p ¼ 0:009) did children with less price knowledge tend to use a 0-ending. For the task of choosing a decimal price from a limited set, the results show no particular trend in terms of 0-ending choices. Therefore, we reject H2b. The choice of ending does not depend on children’s prior knowledge of prices. 4.2.3 Tendency to choose a 0-ending depends on the price level of the product Finally, we tested H2c, which proposed that the price level would influence children’s use of the 0-ending. Specifically, we predicted that the higher the price of the product, the more likely the children would opt for a 0-ending. However, the prices the children in the price attribution task chose indicate a significantly lower proportion of 0-endings for the more expensive products (Table XVI). If the use of 0-endings is indeed related to product price level (which validates H2c), the effect is not in the expected direction. Instead, the children attributed significantly more 0-endings to lower- priced products. Table X Round price proportion depending on product price level (aggregated by price level) in the task of allocation of sale prices for six products by children Products with unit price Products with price for ten Decimal prices (%) 46.97 34.37 Non-decimal prices (%) 53.03 65.63 Total 100 100 p 0.12 0.000 Table XI Choice of non-decimal versus decimal price depending on product price level for six products from a limited set Products with unit price Products with price for ten Decimal prices (%) 41.83 30.58 Non-decimal prices (%) 58.17 69.42 Total 100 100 p 0.000

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For the task of selecting a price from a limited set, H2c is also validated, but this time in the expected direction (Table XVII). In this case, the children attributed significantly more 0-endings to higher-priced products. When products are aggregated in terms of price level, the children were much more likely to select 0-endings for more expensive products. However, for cheaper products, the choice of endings

• scillated mainly between a 0- and a 5-ending, which only

partially validates H2c.

• 5. Discussion, limitations, and further research

As its foundation, this research highlights the different assessments regarding marketing practices on the one hand and children’s behaviour on the other hand. Marketing Table XII 0-ending proportion in decimal prices given by children in the task of allocation of sale prices for six products Decimal prices Champagne Backpack Toaster Cereal bars Yoghurts Coffee 0-ending (%) 68.5 57.1 52.4 74.5 74.5 75.5 Other endings (%) 31.5 42.9 47.6 25.5 25.5 24.5 p 0.000 0.232 0.705 0.000 0.000 0.000 Table XIII Distribution of the three-price endings for six products from a limited set Child’s shampoo Milk Cleanings wipes Child’s tennis racket DVDs Perfume Endings (%) n (%) n (%) n (%) n (%) n (%) n 30 67 29.1 64 43 96 62.6 139 43.4 96 53.2 118 5 45.9 102 35.5 78 28.1 62 14 31 20.4 45 27 60 9 23.9 53 35.5 78 28.5 63 23.4 52 36.2 80 19.8 44 Total 100 222 100 220 100 221 100 222 100 221 100 222 p 0.000 0.410 0.006 0.000 0.000 0.000 Table XIV 0-ending proportion for non-decimal prices given by children depending on education level for six products from a limited set 0-ending Child’s shampoo Milk Cleaning wipes Child’s tennis racket DVDs Perfume CE1 (%) 32.40 20.60 41.20 73.50 38.20 67.60 CE2 (%) 34.20 19.70 44.70 55.30 44.70 52.60 CM1 (%) 38.00 42.00 40.00 66.00 26.00 64.00 CM2 (%) 17.20 32.80 43.80 60.90 56.30 35.90 p 0.064 0.03 0.953 0.289 0.12 0.005 % 0-ending 30 29 43 62 43 53 Table XV 0-ending proportion in decimal prices chosen by children depending on knowledge level for six products from a limited set % 0-ending Champagne Backpack Toaster Cereal bars Yoghurts Coffee Good knowledge (%) 45.87 52.29 53.21 34.86 41.28 34.86 Poorer knowledge (%) 45.87 46.79 57.80 52.29 43.12 45.87 p 1 0.416 0.496 0.009 0.784 0.098 Table XVI 0-ending proportion in decimal prices chosen by children depending on product price level in the task of allocation of sale prices for six products Endings Products with unit price Products with price for ten 0 (%) 75 61 5 (%) 9 12 9 (%) 9 17 Others (%) 7 10 n 298 219 p 0.003 Table XVII 0-ending proportion in given prices chosen by children depending on product price level for six products from a limited set Endings Products with unit price Products with price for ten 0 (%) 34 53 5 (%) 37 20 9 (%) 29 26 Others (%) 298 219 n 0.000

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practices, including the use of decimal prices, are widespread, though their effectiveness is not always evident. Prices at points of sale and in mail-order catalogues overwhelmingly demonstrate the use of 0-, 5-, and 9-endings. Because younger children recognise sales techniques and tactics, assessment of their price responses and preferences is increasingly necessary. This research investigates young consumers’ reactions to certain marketing practices linked to price choice, including various formats and endings. For the hypothesis pertaining to children’s preferences for round prices, the findings suggest that these preferences are particularly prominent for high-priced products and increase with education level, which contradicts the hypothesis based

• n children’s cognitive capacities but seems in agreement with

marketing practices. If children choose prices from a constrained set, the tendency to round prices remains significant and extends to all products, not just high-priced

• nes. Again, this tendency is especially meaningful in older
• children. Finally, when prices are in non-decimal form,

children more willingly choose a 0-ending for the decimal portion, in line with the relevant hypothesis. However, in contrast with what we expected, the level of price knowledge does not seem to affect children’s inclination to choose a 0- ending. Although this research, which examines the impact of price presentations on young consumers, is an early contributor to the field, it offers several managerial implications. A better understanding of young consumers’ price presentation (format and ending) preferences would reveal the possible efficiency of certain valuable price forms and help companies develop a pricing strategy that appeals best to their target

• audience. In particular, these results could be used by

manufacturers that design specific store formats for young consumers; retail managers also could adapt price presentations to appeal to children (e.g. use round prices for expensive products). Examining children’s buying behaviour related to price (considering the pricing policies of the store and product brand) can reveal their likely price behaviour in the long run and support the development of a pertinent loyalty strategy for such customers. Yet this research also inevitably suffers from several

• limitations. First, the children in the sample all represent

urban backgrounds, which could influence their marketing

• experiences. In general, this study contains little personal

information about the child respondents because of the difficulties of interviewing this specific population and the reticence of parents to provide information about their children. Second, the choice of products relied on three initial criteria (product recipient, price level, and food or not). However, these variables are not always the most relevant, and an assessment of familiarity with the product could provide an additional and important explanatory factor. Third, the selling price attribution task assumed that children would choose a “reasonable” price so that they could sell the product. However, the chosen price then can be analysed in two ways: according to its level and according to its presentation. The formulation of the question is not without certain bias. However, prior price literature indicates few convergent results regarding the impact of price format and ending on consumer behaviour, so this methodological choice is simply one of several spontaneous answers that could identify the price presentation perceived as most effective. We also identified inconsistencies in the results, especially when we tested H2c using different modes of questioning (i.e., the child as a salesperson in the price allocation task, and the child as a buyer when choosing from a limited set of price tasks). Other research that uses the same type of questioning might confirm or deny the relevance of this choice. Specifically, it would be desirable to repeat the price allocation task and the limited choice task with the child in the position of both a buyer and a seller so that a stricter comparison could be made. Moreover, if an identical questionnaire was administered to an adult population, it would be possible to compare results from the two populations, taking into account methodological differences as necessary. Fourth, this study does not reveal the methods children use to assess visuals with regard to their information. For example, what weight do they attribute to the brand when it is visible or even to the shape or size of the product? However, we performed tests to verify a possible influence of the presence or absence of a brand on the products in our questionnaire[13]. In line with the pre-test stage results, brand had no influence. Qualitative questions could provide such information. Further research should check these variables to clarify children’s treatment of prices. In addition, the use of a semiotic approach to numbers (Eco, 1970; Floch, 1995) could shed further light on the question. These results and limitations suggest several other avenues

• f research as well. Taking the status of the products, in terms
• f involvement or familiarity, into account might explain

attributions or choices of prices. Furthermore, because a quantitative approach could not explain the reasons children choose certain prices, extensions of this study should employ a more qualitative approach. Doing so could, for example, help inform the treatment of price information by children and enable comparison with adult treatment of price information.

Notes

1 In this article, “presentation” refers to both price format (decimal versus non-decimal price) and ending (final number). 2 The use of the metaphor of a mental numerical line to describe the numerical representations resulting from approximation to and comparison with large numbers began in the late 1960s (Moyer and Landauer, 1967; Restle, 1970). 3 Parent’s permission was received. 4 The price variation in the observed prices is ^5 per cent. 5 Maximum range of proposed prices in relation to real prices is ^10 per cent. 6 The precise instruction was: “Imagine you are the boss of a shop where you must sell six products. You decide the

• price. Beside each picture of the product, write the price

that seems best for you to sell the product”. 7 Children in the below-median group had fewer relative errors in their responses, and therefore we view them as having a greater price knowledge. 8 We measured this using the price determination task. 9 Indeed, a 10 per cent precision in the price of a single- unit item is expressed in cents (hundredths of a euro), whereas the same precision in the price of a ten-pack item is expressed in whole euros.

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10 This result derives from a Wilcoxon matched-pairs signed-ranks test. 11 We validate this using dummies. 12 For the products for which the result is not significant,

• ften only a few decimal prices were given (in particular,

children chose round prices for these products). This sometimes creates samples that are too small for significance tests. 13 We obtained significant chi-square tests for all groups of products that we tested and for all the respondent tasks.

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About the authors

Coralie Damay is a Marketing Professor at ISC Paris. Her main research involves the behaviour of young consumers. She studies relationships between children and prices, including the role of prices during buying processes, how children memorize prices, and how they evaluate products. Her research also involves obesity and points of sales. Coralie Damay is the corresponding author and can be contacted at: cdmay@iscparis.com Nathalie Guichard is a Marketing Maı ˆtre de Confe ´rences – HDR at Panthe ´on-Sorbonne University. In her research, she focuses on children’s consumer behaviour in response to marketing mix variables. Her main research deals with the relationships between children and advertising, as well as the roles of prices and packaging in children’s decision making, childhood obesity, and points of sales. Ame ´lie Clauzel is an Assistant Professor of Marketing (Maı ˆtre de Confe ´rences) at Evry Val d’Essonne University and Paris-Est University (UPEC). She studies consumers’ choice behaviours in response to marketing mix variables in direct and indirect social interactions.

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