Thursday, April 4, 2013

Offer Bonus Packs of Virtue, Discounts on Vice

With a bonus pack, you offer more of the product at no additional price. With a price discount, you offer the same amount of the product at a reduced price.
     University of Utah researchers find that with healthy food items, shoppers prefer a bonus pack to a price discount, while the preference is for a price discount when the shopper identifies the food as unhealthy.
     If an item is a vice, the price discount helps the shopper to justify the purchase. Getting an additional quantity, even if at no additional monetary outlay, would seem overly sinful.
     However, with items not considered unhealthy by the consumer, there is a general preference for bonus packs over economically equivalent price discounts. To understand why, consider a field experiment conducted by researchers at Texas A&M University, University of Miami, and University of Minnesota:
     The site of the experiment was a small retail store in a suburb of a large city. The product in the experiment was a 9 oz. container of Fruits & Passion hand lotion, which at the time of the study carried a regular price of $13.50. The nature of the experiment was to reduce the selling price to $9.00 and advertise a special sale in two different ways at different times:
  • “35% price discount.” Actually, it was one-third, or about 33.33% off. 
  • “50% more for free.” The pro-rated price for 6 oz. was $9.00, so the extra 3 oz. was at no extra charge. 
     Sales of the product during the “50% more for free” weeks were about 75% higher than sales during the “35% price discount” weeks.
     Why? Probably because 50% is a larger number than 35%, even though the true economic gain for the purchaser was the same. Consumers are, in general, not good in making sense of percentages. A couple of the researchers who did this Fruits & Passion study had previously found that consumers will choose a double price discount of “25% off plus an additional 20% off” over a single discount of 40% off. If you calculate 25% off and then take the 20% off from the remaining 75%, you’ll find that it leaves 60%, which is 40% off!
     In your store, offer bonus packs of virtue and discounts on vice. When selling items which include both utilitarian and indulgent components, emphasize the discount on the indulgent, thereby giving the shopper permission to purchase them, too.

Click below for more: 
Bundle Utility, Discount Hedonism 
Try Out Dollar Over Percentage Discounts

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