Wednesday, October 5, 2011

Try Out Dollar Over Percentage Discounts

A recently released white paper from social network marketing consultants Buddy Media says that Facebook users are significantly more likely to respond to “dollar off” promotions than to “percent off” promotions. Among the Buddy Media respondents, discounts of under $10 received about 17% higher engagement than “percent off” coupons.
     (The study can be downloaded from the Buddy Media site. Free registration is required.)
     This finding runs counter to the time-tested advice that retailers should advertise “percentage discounts” rather than “dollar off” discounts. A Marketing Daily posting last week reports that among the most popular internet searches are percent-off deals.
     One explanation for the Buddy Media finding? That traditional advice also says shoppers will respond to a discount of 15% to 20%. However, the Marketing Daily article was titled “The New Consumer: 30% Off Is The New 20%.” More internet searches are being done for 30% than for 20% now. In their online promotions, Land’s End—which was featuring discounts as small as 5% in 2009—is currently selectively offering 30% discounts.
     What difference does this make for you? As the shopper comes to expect higher and higher percentage discounts, try out switching the language to dollars saved. Many consumers are looking to trim every last penny off their purchases.
     I say, “try switching,” because the Buddy Media conclusions are not time-tested and they might apply mostly to Facebook users. Other findings were that keywords like “sale” received especially low engagement, while the word “coupon” came in at almost 40% above the average level of engagement. The keyword phrase “% off” was also among the lowest.
     A more general finding in consumer psychology is that percentages are easier than raw frequencies for a person to understand and remember. Therefore, if ease of comprehension is important, present the percentage format. This would be especially true if your statement has lots of elements to understand and remember aside from the frequency itself.
     If you’re asking prospects to calculate a percentage of a percentage, staying with the percentage format will make the discount seem higher. For instance, if you’re offering a 25% discount off of a previously discounted 20%, the discount off the original price is 40%, but many consumers will judge the discount to be closer to 45%. Research at University of Miami and University of Minnesota suggests that most consumers come up with erroneous frequency conclusions when calculating percentages of percentages.

Click below for more:
Reassess Your Pricing Assumptions
Choose Between Percentages & Frequencies

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