% off or $ amount off, which is better?

Which is better?  20% off or $15 off.  I’ve heard arguments for both but is it better to give a percentage off or a dollar amount off, please let me know in the comments below (if you comment you’ll get a tweet from me and if it is good enough a prize!)

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15 replies
  1. Bart Soroka
    Bart Soroka says:

    Twenty percent off is better when the item costs more than $75. At seventy five, the discount is the same (and probably will be all the way to seventy six), but at seventy six the discount becomes (76-(7.6*2=15.20)=60.80), compared to 61 with just the fifteen dollar discount

  2. Greg Hluska
    Greg Hluska says:

    At $75, the net benefit is equal. If price > $75, take the 20% off. If price < $75, take the $15. But, if you're asking from a consumer behaviour point of view, my answer is 'that depends'.

  3. Bart Soroka
    Bart Soroka says:

    I tweeted it, but may a well toss it in here: Go with an “up to” percent throughout the entire store, with one big ticket item (Sweet TV) at, say ninety percent off. So your adsay say

  4. Bart Soroka
    Bart Soroka says:

    This website is not smartphone friendly:p
    Your ads should say “everything in the store up to ninety percent off”, cut to the Sweet TV, and show it going from a VERY high number (about 1.5x higher than retail) to like, a hundred bucks. People see this and do assume mass savings to everything in the store. They’ll line up, you’ll have the Sweet TV in the very back, and only have one or two in stock. People will assume that a “fair” price is jacked up (price anchoring), then use discounts on that, and probably exaggerate their effects (assuming fifteen percent off is equivalent to twenty because twenty is easier to calculate). Large amounts of people in your store + perceived “savings” on every purchase = higher than average amount and cost of purchases per consumer. Dollar amounts can work… But subtraction is easier than percentage work

  5. Nick Faye
    Nick Faye says:

    Personally, I believe a percentage is better from a consumer behavior perspective. I think a lot of individuals enjoy the anticipation of finding out how much they save at the till/calculating it themselves, rather than just blatantly stating how much money you save. It’s more fun!

  6. Bravo Tango
    Bravo Tango says:

    From a consumer’s p.o.v., we’ll react positively to whichever discount is greater. We’re a discount-savvy nation who loves a great deal. We’ll figure it out pdq. So on a $90 item, Store A offers it at $15 off while Store B offers it at 20% off. Store B will sell a lot more. And if the consumer purchased from Store A only to find out later that they could have saved an additional $3.00 from Store B, prepare for a visit from them b/c they’ll want a full refund or a price match. Consumers are very cost sensitive today and will research prices in great detail.

  7. Bart Soroka
    Bart Soroka says:

    I stand by that statement, blanket as though it may be. Even selling to a so-called savvy consumer, store A may not see so many returns: Sacco consumers would probably include time and fuel costs in their return decision.

  8. Bravo Tango
    Bravo Tango says:

    in reply to “Sacco consumers would probably include time and fuel costs in their return decision.”, i think it could go either way really. I’ve seen consumers wait in longgggggg line ups burning fuel – and time – just to save $0.04 at best on gas. Case in point, drive by Regina Cab gas station on Sk Drive any time this week and you’ll witness cars backed up onto the street burning fuel as they idle their cars waiting in line to save pennies. Makes no sense, but they do it anyway thinking they’re saving a buck – literally. People go out of their way to save $ whether it be $0.04 per litre or $3.00 on a shirt or “No Payments Until March 2011 on ALL in-stock appliances!!!” Buy Buy Buy!

  9. Jeph Maystruck
    Jeph Maystruck says:

    Sounds like consumer behavior may be counter-intuitive, as in wasting time and money to save a perceived amount (the gas station). So do marketers just need to simplify and not complicate their discounts? Makes sense to me. Percentage trumps dollar amount but dollar amount work for simplicity sake.

  10. Derek Leverington
    Derek Leverington says:

    Hi Jeff,

    Interesting question. The dollar discount helps me calculate the actual savings of this one transaction but I find that I’m more drawn to make a determination about whether it’s a good deal or not. For me, the percentage discount is more helpful in that respect as I have already have a pre-conceived idea of what a respectable discount should be.

    For example, 5% is no motivation at all, I could probably ask the salesperson for that any day. Once we get to 20% or 25% plus, now I’m starting to get excited about saving some money.

    As an aside, I would urge caution with discounts. Once they become overused, they start to erode the perception of the brand. You can only go the discount well so many times before you train your customers that they can buy for less by watching for the next sale.

  11. Jeph Maystruck
    Jeph Maystruck says:

    Very smart Derek, brands should offer a discount over and above what most people would think as “valuable” if they want a response. There is only so much discounting a brand should do before it becomes a detriment, price shoppers are usually never loyal customers anyway. Thanks a lot for your thoughts Derek,

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  1. […] This post was mentioned on Twitter by K Harazny. K Harazny said: Depends if item is $75 or more. RT @Fraserstrategy: 20% off or $15 off which is better? http://bit.ly/hiNdSc Please I really want to know […]

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