The Psychology of Prices & Percentages in Promotions

What’s a more persuasive offer in a headline — “25-50% off” or “up to 50% off”?

According to Marketing Experiments‘ Yoda-smart Dr. Flint McGlaughlin, when shown an X-Y range of numbers in an ad, most people will revert to the first number as the mean (average) standard. So with a headline of 25-50% off, it will be assumed most items are 25% off, and very few are 50%. (This is not surprising when you think about scratch-and-win tickets with prizes ranging $5 to $50,000. You assume most prizes awarded are at the lower end of the range.)

vs.

Based on his research, Dr. McGlaughlin recommends using the “up to X% off” tactic instead of a range. Similarly, “up to 50% off” is more persuasive than “over 25% off.” On the flip-side, when dealing with dollar figures rather than percentages, you want to use your lowest price point in your ad. “From $50″ is better than “$50-$150.”

Customers are also not rational when it comes to shipping offers. Professor at the Wharton School of Business, Dave Bell, found that consumers preferred free shipping worth $6.99 in savings over a $10 discount on the product.

This understanding can help you craft more persuasive email subject lines, banners and pay-per-click ads to create higher response. Of course, here at Get Elastic we encourage you to test everything. Have you tested price ranges or shipping offers and found the opposite to be true?

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16 Responses to “The Psychology of Prices & Percentages in Promotions”

  1. Very interesting. People really hate to pay for shipping. It feels like you are paying for nothing.

  2. Rishi says:

    Excellent post.  Makes so much sense.  The last link in the article needs to be re-pointed.

    Rishi

  3. Kerrin says:

    And also the classic of how much better $9.99 sounds than $10! It’s a very interesting area and so important to clinching the sale.

    Thanks Linda!

    • Intersting book “Smart Pricing” (Raju, Zhang) has a section on “Pinching Pennies” – studies going back 70 years have found that 5% more customers will buy $9.99 vs. $10, but round number prices are associated with quality. If you want to position your brand or products as quality, try the round number!

  4. Alvin Tan says:

    Personally, they connote the same to me. “Up to 50% off” still brings to my mind, “very few are 50% off.” In fact, “up to 50% off” is so vague that it’s hard to win my attention. It also *feels* dishonest.

  5. John Hyde says:

    I was selling a $100 product with a 25% discount = saving of $25

    Advertising it as “save $25″ was stunningly better than “save 25%”.

  6. Let me see if I got that right:

    When you advertise savings with %, use the highest number.

    When advertising $, use the lowest number.

    Never use a price or percentage range.

    Free shipping is valued higher than getting the shipping price as a discount (up to 140% of the shipping price).

    xxx.99$ gets you up to 5% more sales, but your product may be perceived as low quality.

    Advertising $ savings may get you more customers than % savings.

    • Good summary of the points. Yes, this is what the research says, but as with all “best practices” – it might not work out the same way for your particular campaign, but there is empirical evidence that it “should” hold true in the wild.

  7. Yeah Fred, I totally know what you mean. People do hate to pay for shipping, why not just incorporate a standard shipping fee to the price of the item right?

  8. You have to experiment as much as you can. Percentages off make a huge difference. If you ever want to see a serious spike in sales for a 50% off sale for a few hours only and see what happens.

  9. Quite an interesting research, I highly recommend downloading and reading MarketingExperiments quarterly research journal, loads of valuable insights.

  10. This is very interesting data and certainly worth trying but as stated in the article the only way to really know for sure is to continually test different headline offers to see what is more persuasive and leads to higher conversions.

    This is a great scenario where A/B testing would provide valuable information as to what works best.

  11. Thank you for the useful information. These are things we customers never thought about. As you know, everybody is a customer, even the sales manager;)

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