Consumers react differently to discounts depending on whether they’re presented as an amount off or a percentage off, especially for more expensive products, according to a study led by Eva M. González of Monterrey Institute of Technology and Higher Education. 151 students were assigned to four conditions. Some saw a lower-priced item — a balloon that cost 48 pesos — on sale for either a 12-peso discount or a 25% discount. Others saw a higher-priced item — a jacket that cost 480 pesos — on sale for either a 120-peso discount or a 25% discount. Participants in the higher-priced condition said that the promotion offered higher value when it was presented in pesos instead of as a percentage. They also said they were more likely to use the promotion when it was marked in pesos. For the lower-priced item, the difference in preference was not statistically significant. “Even when people understand percentages and dollar amounts, consumers tend to focus on an absolute number in isolation, so a 20% discount appears larger than $10 for a $50 item, and a 20% discount seems smaller than $80 for a $400 item,” write the researchers. They suggest retailers should provide consumers with an absolute savings amount for big-ticket items.
Source: Amount off versus percentage off—when does it matter?
