A&W's pricing strategy & why it works

A&W's Pricing Strategy & why it works

Introduction
Fast-food joints make their money by offering quick, cheap eats and marketing them towards a large segment of the market. Often times, the quality is low - but financial goals are met with tactful pricing strategies, promotional strategies and impulse-driven branding. However, recent years have shown society moving towards healthier lifestyles and more health-conscious choices when it comes to their food. At first, giants like A&W and their competitors dismissed the new health wave as a fad - but soon noticed a steady decline in their sales - which triggered a movement to re-brand to appeal to the new-found values of a large segment of consumers. 

 Odd-even pricing defined
One of the main strategies used by fast-food joints is odd-even pricing. It has been suggested that pricing items just under a whole number, such as at $3.99 instead of $4.00, makes the price seem like a bargain – that customers will focus only on the first number and perceive the price to be closed to, in this case, $3 than to $4. 
But in broader terms, odd pricing suggests a bargain versus even pricing, which encourages buying.

 A&W's pricing strategy: whole numbers
The movement to healthy eating choices shifted consumers' priorities to quality ingredient awareness in combination with seasoned values of low-cost. A&W saw this as an opportunity to stand out from their competitors. They introduced new items, mentioned hormone-free beef to promote higher-quality ingredients, and altered their pricing model to reflect the added value in their food. The whole numbers psychologically sent a very clear message: "we have improved our quality, we no longer want to bargain you, instead, want to encourage you to buy something that is just as whole as our all of our new ingredients." 

 Conclusion
A&W's pricing strategy works very well in combination with the rest of their marketing mix. A&W re-branded as a company that wanted to be seen more as an upscale fast-food restaurant, including upgraded premium ingredients with a focus on health, so pricing using whole numbers – even numbers – made more sense, and has proven to be effective.
References

 https://www.shopify.ca/encyclopedia/odd-even-pricing

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