Can a Small Discount be Big Discount?

Car manufacturers are always trying to solve a conundrum; how do you make a small car feel less small? Everyone knows that big cars are associated with all the positive stuff; power, comfort, luxury, status, indulgence.

Small cars are associated with practicality, frugality, compromise, convenience.  Worthy, certainly. But truly desirable?

To overcome this car manufacturers do one of two things.

They make small cars physically bigger until they reach a point where no one can pretend it’s still a small car. Then, at some point, they have to bring out a new model that really is small again.

Or else their marketing tells us that their small car is really a big car in a small body so it’s OK to buy it and not feel bad. “Honestly”, they say, “you’ll never realise that this car is small once you’re inside.”

Of course no one is suggesting that when they use the “tell consumers that the small car is actually big” ploy anyone really thinks it is bigger.

This is, of course, just a simile: the car might have some qualities that you associate with a bigger car, so you can feel better about owning it. The car is physically whatever size it physically is – that’s fixed.

However, when it comes to numbers (and therefore discounts), recent research has shown that the way in which people perceive a number has much to do with how it’s expressed.  What everyone would say is equal if they were considering it rationally causes them to behave differently when they encounter it.

This is another of those fascinating insights that show our behaviour is largely a by-product of unconscious mental processes.

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  ¬ /releases/2009/01/090121155320.htm

Image courtesy: Romain Drapri

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