Use non-rounded discounts
Precise, non-rounded, discount percentages increase purchase intention by up to 18% vs rounded discounts (e.g. 7.7% vs 8% off)
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You're putting some of your products on sale, as it’s time to get rid of some old stock.
So you reduce last year’s baseball hats from $29.99 to $27.68, giving 7.7% off.
“7.7% sounds a bit like a mouthful, people will probably be put off” you think, and round the discount on display to 8%.
Well, you just lost sales.
P.S.: When possible, end your discounted price with .99 and make sure to show the original price next to it.
P.P.S.: Thank you Phill for having me on the latest episode of Nudge Podcast!!
Rounding discount percentages to a whole number reduces purchase intentions
Channels: Discounts | Pricing | Promotions
For: B2C. Can be tested for B2B
Research date: September 2023
Display your discounts as precise, rather than rounded numbers (use 12.5% instead of 13%).
People will perceive your discounts to be shorter in duration, and will be more likely to buy right away.
People have higher purchase intentions when a discount is displayed as a precise number (rather than a rounded one).
As part of a series of 4 experiments, researchers found that when people were shown a precise (vs rounded) discount they were:
13.3% more likely to say they would buy a hard drive (6.8% vs 7% off)
11.4% more likely to say they would buy a cooler
17.7% more likely to say they would buy a water bottle
The effect is weaker when the discount comes with a time pressure message (e.g. “Today only”).
🧠 Why it works
We consider precise ideas and concepts (e.g. a specific price of $4.87 versus $5) to be more likely to change over time.
On the other hand, round numbers seem more ‘stable’ and signal that they are likely to last for a longer time (e.g. a permanent student discount policy)
So when we come across a precise discount, we have an increased fear of missing out on a deal.
This increased sense of urgency makes us more likely to buy right away.
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The research only tested utilitarian products (e.g. hard drive) - typically bought for their functionality. It did not test hedonic products (e.g. perfume, jewelry), which tend to be more emotional purchases. Precise discounts might not work as well in the latter case, since people prefer round prices when buying hedonic products.
The study did not test amount-based discounts (e.g. $8 off). It only tested percentage-based discounts (e.g. 8% off). It's likely to also work for amount discounts, but more research is needed to confirm this.
The experiments focused on small discounts (less than 10% off), the effect may not be as strong for larger discounts.
🏢 Companies using this
Companies don't appear to be using this. The vast majority round their discount percentages.
Retailers seem to round up to the nearest number when discounting products as they may believe that displaying higher-value discounts, or simpler numbers, will increase purchase intentions.
When precise discounts are used, they tend to be for more inexpensive, non-premium products. High-end and luxury brands are less likely to use decimal discounts.
Precise discounting is not commonly used, while the opposite practice is common. For example, Amazon rounds up an actual 12.9% discount to display it as 13%.
⚡ Steps to implement
Review how you display your discounts.
Remember, try to use % off discounts when your product is priced below $100. Use amount off discounts when your product is priced above $100 (or 100 in any currency).
Keep percentage discounts precise instead of rounding them. For example, to boost sales, use 7.5% instead of 8%.
Make sure to justify your discounts (e.g. birthday weekend sale) if they are online, to make them more effective.
🔍 Study type
Lab and online experiments.
Can rounding up price discounts reduce sales? Journal of Consumer Psychology (September 2023)
Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also 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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