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What a “Price Vocabulary” Is, and Why Companies Need One | Harvard Business Review

The next time you visit a Costco warehouse store, observe the price tags. In addition to showing the cost of an item, Costco’s price tags encode unique information. The price endings, such as $8.99 versus $8.97, convey special meanings to the subset of shoppers who are literate in Costco’s price vocabulary.

As one example, when a product’s price ends with .99 at Costco ($6.99, say), it is generally the regular price that shoppers would pay. That means it’s not a limited-time promotion. On the other hand, when prices end with .97, they are for clearance items that have been marked down. These are likely special, limited-time promotions run by the store’s managers to sell slow-moving or seasonal items. There are other specific connotations for prices ending with .88 and .00. An asterisk has its meaning too, as does the date code.

These symbols together form a price vocabulary that provides Costco’s customers with potentially useful information for their purchase decisions. Costco is far from the only retailer that does this. Walmart has its own vocabulary, and so do retailers including T.J. Maxx, BJ’s Wholesale, and Home Depot. Marketers should pay heed. A price vocabulary provides a novel and inexpensive way to create sustainable differentiation and increase customer engagement.

What Is a Price Vocabulary?
A price vocabulary is a unique and consistent set of prices — particularly price endings, plus other symbols such as glyphs, numerical codes, and sale tags of specific colors — that a seller can use to convey informational cues to consumers. Examples of informational cues are “This is the product’s regular price, so no need to purchase now” or “This is a limited-time manager’s special, so it won’t last long,” or “This is a sale that is paid for by the manufacturer — we are simply passing the incentive on to you.”

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What a “Price Vocabulary” Is, and Why Companies Need One.

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