Can a Small Discount be Big Discount?

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The research by an Ohio State psychology professor explored how people reacted to different expressions of the same number. The study used the prisoner’s dilemma – where two participants have to decide privately if they are going to co-operate or defect, for varying levels of financial reward.

What the study found was that when the participants were given a prize for co-operating expressed in cents rather than dollars they co-operated more often. Even though they knew that $3 = 300 cents, they were more attracted by the 300 cents.

It seems that people get a feeling about the larger number that is quite detached from its actual financial value.

Also, as the authors point out, the difference between $3 and $5 feels  much greater than the difference between $103 and $105. Our perception of numbers is nowhere near as rational and logical as the numbers themselves.

This could be particularly useful when it comes to considering how best to position price discounts. For example, should you say 10% off or state the actual amount of the reduction? The answer is it depends on which is the bigger number – the 10 or the amount of the discount.

On higher ticket items it's likely to make more sense to state the amount of money that the 10% saving represents, but on low cost items the percentage reduction may feel like a better a proposition.

If you have a degree of discretion in pricing it's worth considering how the numbers will look when you price. Psychological pricing isn't new – and is so common place the 'attractive' digit is now a point of some debate – but very few people think to consider how a later promotional price will feel next to the original.

Source: Ohio State University (2009, January 21). Sometimes 100 Cents Feels Like It's Worth More Than A Dollar. ScienceDaily. Retrieved January 26, 2009, from http://www.sciencedaily.com  ¬ /releases/2009/01/090121155320.htm

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Traditional consumer research won't tell you what's really going on in your customers' minds.

You can get a deeper level of consumer insight for your product or store by employing a consumer behaviour expert to analyse the unconscious influences that are driving what your customers actually do.

Please contact me if you have a project you wish to discuss or if you have any questions on consumer behaviour: philip@philipgraves.net