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Monday 14 January 2008

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You’d think that a discount was a simple matter of dropping prices to encourage spending. But US researchers have found that is not enough just to reduce the price. Apparently when you have identical left digits in your regular and discounted prices, you have to use a “low-value” right digit in the prices to take advantage of a distorted perception of value.

Enter the realm of “numerical cognition” and “mental heuristics” where human psychology has been dissected in fine detail in the search for better ways to extract dollars from consumers.

Writing in the Journal of Consumer Research, marketing professors Keith and Robin Coulter report that where the left-hand digits are identical, discounts which use smaller numbers (1-4) in their final (right-hand) digit are perceived to have greater value that numbers which use digits in the range 5-9.

The professors conducted a number of experiments where they showed the same product being advertised with the same amount of discount but where the right hand digits were different.

They showed the regular price above the discounted price but did not mention the amount of actual saving (either as a number of percentage).

In all cases, the perception was that the discounts were greater when smaller right-hand digits were used.

“We find that consumers may attribute higher percentage discounts and greater value to higher-priced, lower-discounted items (e.g., $244/$233) than to the otherwise identical lower-priced, higher-discounted items (e.g., $199/$188),” the professors reported.

Of course, those potential consumers who simply do the mental arithmetic fall outside this phenomena. We are talking about those who glance at the comparative regular and discounted prices and move on. However, the professors point out “consumers often employ mental heuristics to avoid the effort of calculating the difference”.

I find the science of consumerism staggering. At this level of detail it’s the equivalent of molecular biology or particle physics.

I guess it’s good for businesses to know this stuff, but it’s hard to argue that this kind of research is going to lead us to a better world.

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