Relieve the Pain with Probabilistic Discounts

Consumers shop for many reasons other than the material value of the items they purchase. This explains why people winning a 10% discount in playing a game of chance spent more money than an equivalent group who were just offered a 10% discount without needing to play the game. The excitement of the game added experiential value.
     Yet, in exploring the best ways to use such probabilistic discounts, researchers at NEOMA Business School in France, University of Utah, and University of Kansas came up with a finding which seems to contradict the love of a gamble: Compared to when the probability of winning the discount is low, when the probability of winning the discount is high, shoppers are more likely to prefer a sure discount. People are more likely to prefer a “10% chance of receiving a $100 discount” over “a guaranteed $10 discount,” but are more likely to prefer “a guaranteed $90 discount” over a “90% chance of receiving a $100 discount.” Why take a chance when you’re so close to a sure thing?
     Another finding from the set of studies is that how you state the probabilistic discount affects the attractiveness of the promotion. Present the reduced price rather than the dollar amount of the discount. “20% chance of paying $150 instead of $200” works better than “20% chance of getting $50 off the $200 price.” The explanation for this is in how consumers consider spending money as a loss. The first phrasing focuses on the sacrifice being less.
     Because paying money is a burden for shoppers, the rules are different when you’re presenting the cost of an upgrade from a standard to a premium version of an item. Suppose that one retailer’s ad states $199.99 as the price for the standard version of a product and $259.99 for the premium version. Suppose that another retailer also advertises $199.99 for the standard version, but then says in the ad, “For $60 more, you can purchase the premium version.”
     Researchers at University of British Columbia and Nanyang Technological University find that the second retailer’s ad will draw more buyers. Partitioning the upgrade cost makes it seem like a smaller expenditure because it’s a smaller number than the total price. Unlike with the probabilistic discounts, you’re stating the differential cost rather than the total cost. Also, it’s usually best to state the additional amount as a round dollar figure.

Successfully influence the most prosperous & most loyal consumer age group. For the specific strategies & tactics you need, click here.

Click for more…

Convert Shoppers with Lucky Discounts 

Gambol with Gambled Price Discounts 

Partition Premium Pricing for Busy Shoppers