Give Change in Varied Denominations

Let’s say you’ve held a raffle in which two customers each won $100 cash. To make things a little interesting, you give one winner the prize as five $20 bills and the other winner the prize as one $50 bill, two $20’s, and two $5’s. Each got five bills, but in a different combination of denominations.
     And now to make things even more interesting, you invite each winner to spend some of their cash with you right then on a $40 watch. The person can buy it or not using this found money.
     One of the two winners is noticeably more likely to purchase the merchandise than is the other. Which one spends more? The person with the five $20 bills or the person with the five bills of varied denominations?
     A study using parameters similar to what I’ve described was conducted by researchers at University of Iowa. Their prior study had shown that when one person has a single $100 bill and another person has five $20 bills, the person with the five bills is more likely to make a purchase.
     The person with the $100 bill had what the researchers called a “bias for the whole.” It looked like they hesitated breaking the $100 bill. Why was this? Did it have to do with a desire to avoid carrying a clutter of change? Was it because one person had one bill and the other had five bills? Those questions led to the study design in which each person had five bills to start with.
     The bias for the whole still came through. The shoppers who had the bills of varying denominations were more willing to spend their money on the watch, and this was also true when a T-shirt at $20 or a flash drive at $86 were offered. Having smaller denomination bills eased the bias to keep the whole amount.
     Lots goes into a consumer deciding whether to spend cash. Maybe it’s a match between the price of the item and the denominations of the currency the shopper has. Certainly, it’s how attractive the items are to the shopper. But the researchers’ careful four-experiment design showed how a bias for the whole has a surprisingly large influence.
     The hint for shopkeepers and reminder for restaurant servers: When giving change, deliver it in a mix of denominations to motivate further spending.

Click below for more:
Sell More by Adding Variety
Give Shopper Variety for Control
Randomly Arrange Limited Product Sets