Let’s do some quick math. Your favorite food retails for $5 and two offers are available. You can have 25% off or 25% more for free. Which do you want? You wouldn’t care right? 25% is 25%.
Of course that’s wrong. Most people don’t recognize that. Here’s the math to show you which is better.
Assume the product comes in 4 units. At the standard price you pay $1.25 per unit. 25% off takes the price down to $0.94 per unit. 25% more free at $5 is $1 per unit. Less is more? More or less.
Most consumers struggle with confusing marketing messages. And they aren’t very good at figuring out what the best deal is either. Would you rather have 20% off then another 20% off or 40% off? Because that’s not the same either.
Playing strictly with percentages isn’t the only thing that fools consumers either. Take a look at the picture up top. See that you can have savings up to 50%? Well many consumers seem to think that means everything is 50% off, at least in the back of their heads. I’ll pick on World Market anyway since they screwed me over on a desk. Check out the top row of two sections on their sale page here and here (ignore the racist chair). How much is 50% off?
In all fairness there are items that are 50% off. Just not as much as one would think and not so prominently displayed as the ad the front page. And the chairs were not among the things 50% off. Those pillows aren’t even on sale.
And research indicates people fall for these tricks left and right:
The researchers used different versions of an ad for windows — one that stated that the windows were “proven to save up to 47% on heating and cooling bills,” and one that simply stated, “proven to save 47%.” Of those who looked at the “up to” version, 45.6% mistakenly said the ad promised to save 47%. Meanwhile, only 58.3% of consumers who saw the unconditional version said the ad promised to deliver 47% savings. According to the FTC, the small difference between the two results indicates that the use of “up to” did little-to-nothing to change consumers’ perception that the ad was promising the maximum level of performance.So we get it. Consumers are stupid. The next question is whether anything should be done about it. The research above was actually commissioned by a government agency. Should the government regulate how this messaging is delivered? The implications go beyond discounts. High speed internet companies do the same thing promising up to X speed but never really delivering it.
I’m on the fence. On the one hand the system can be abused and deceive customers. On the other hand I’m not opposed to idiots falling for these little tricks. What say you reader? Do we have someone come in and force everyone to play nice? Or just acknowledge the general stupidity of the population and know marketers would figure something else out anyway?
Read: Something doesn’t add up: How marketers can take advantage of consumers’ innumeracy
Read: Study: Nearly Half Of Consumers Fooled By “Up To” Claims In Advertisements
 By The Weakonomist |
The Weakonomist is the face of Weakonomics. Click the puppy to learn more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts above. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing we say can be construed as financial advice. |
