Use consistent endings in discounts

When offering a discounted price (e.g. $16.75), keep the price ending consistent with the original price (e.g. $26.75, not $26.99). The discount will work better and more people will buy.

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📝 Intro

As we’ve often seen before, people are ‘lazy’. They don’t want to spend mental effort understanding your product, offer, or price.

One of the jobs of marketing is to make it as easy as possible for them to understand at a glance what you are offering them. The result is, typically, better sales.

Today we look at how this applies to discounted prices, and an easy rule you can use to make it easier for people to know how much they’re saving.

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Previous tip: A simple rule to use $10 or 10% off (All tips here)

Use consistent discounted and original price endings to make discounts easy to understand

Impacted metrics: Customer acquisition
Channels: Promotions | Pricing
For: B2C. Can be tested for B2B
Tip type: New research (May 2021)

📈 Recommendation

When giving a discounted price, show the original price next to the new one so people understand how much they are ‘gaining’ with the offer.

To make the offer more effective, keep the ending of the discounted price (e.g. “sale $16.95”) consistent with that of the original price (e.g. “was $36.95”, not “$37.79”).

This way, the subtraction is easy to make (e.g. discount is $20 = $36.95 - $16.95) and your price will appear cheaper.

🎓 Effects

  • Extensive research since the 1970s found that showing original prices when giving a discounted price is an effective way to increase sales. This is now common practice.

  • This study found that sales increase when the endings of the original and discounted price are the same (e.g. discounted price $531, full price $731, discount = $200), compared to when they are different (e.g. discounted price $529, full price $731, discount = $202). Even when the discounted amount would be slightly higher.

  • For example, people in experiments:

    • Perceived a shampoo in a shop to be 12% cheaper and said they were 12% more likely to buy it when it had a discounted price (NT$ 389) consistent with the original price (NT$ 489, discount = NT$100) - compared to when the original price wasn’t (NT$ 492, discount = NT$103). [Note: NT$ = New Taiwan dollars].

    • Said they were 19.3% more likely to buy an electric fan and perceived its price to be 24.2% cheaper when the price was consistent

  • The effect disappears if the price is only two digits (e.g. $19) since they are easy enough to calculate rapidly.

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🧠 Why it works

  • We’re lazy. We don’t like to make complicated calculations to understand how much a discount is actually worth.

  • Consistent price endings make it easier to calculate a discount and understand it.

  • So we’re more likely to consider the benefit of a promotion.

  • And more likely to buy.

✋ Limitations

  • The study tested relatively cheap products (e.g. a cake, a shampoo). We’re unlikely to spend much mental energy when considering buying these products. This may not be the case for more important and expensive purchases (e.g. a car).

  • The experiments focused on offline contexts. However, the effect should also apply in online situations.

🏢 Companies using this

  • Companies don’t appear to be taking advantage of this effect. 

  • This is particularly the case for grocery retailers (e.g. Carrefour) and sellers of low-medium cost products (e.g. a Nike t-shirt on sale), who are the ones that would benefit the most from this effect.

⚡ Steps to implement

  • Make sure you always show the original price as a reference when you offer a discounted price.

  • Use consistent discounted and original price endings when your price has more than two digits so that people can easily calculate and understand how much they “gain” from your offer.

  • Alternatively, you can try to directly tell how much discount you are giving in your offer (e.g. $20 or 20% off - here’s which one you should use). The downside is that you risk overwhelming with information or may not have space in the creative to communicate this too.

🔍 Study type

Lab and field experiments. Taiwan

📖 Research

Hung, H. H., Cheng, Y. H., Chuang, S. C., Yu, A. P. I., & Lin, Y. T. (May 2021). Consistent price endings increase consumers perceptions of cheapness. Journal of Retailing and Consumer Services, 61, 102590.

[Link to paper]

🏫 Affiliations

Minjiang University, National Taichung University of Education, and National Chung Cheng University. China and Taiwan.

Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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