DISCUSSION
Are consumers stumped by percent-off promos?
Written by RetailWire Staff
Photo: @TYLim via Twenty20
A recent study found that, when advertisers use percentages to promote products, customers tend to be way off in their assessment of what the numbers mean.
The study, as reported by The Wall Street Journal, found that when dealing with percentages exceeding 100 percent, customers more often than not misinterpreted what the figure was meant to signify. When asked to calculate a price of an item that was to be sold for 102 percent more than its original price, more than half of the 400 respondents miscalculated — adding only two percent of the price to the original value, rather than doubling the price and then adding an additional two percent. A tendency for participants to confuse “size of the whole” with “percentage of change in price” when the numbers were bigger than 100 percent appeared to be the explanation. When dealing with percentages lower than 100 percent, study participants fared better.
Consumers have been paying closer attention to percentages as rising inflation has increased consumer awareness of pricing. Practices that retailers and brands use to maintain margins, such as shrinkflation, where the size or content volume of a container is reduced by some percentage while maintaining the same price, have been grabbing headlines and having customers more carefully scrutinizing unit prices at the shelf.
The percentages study is not the first showing that asking customers to do math about pricing in the moment can point them to unexpected conclusions.
Last year a study on coffee prices found that when prices are set just below a round number (for instance, $19.99 or $19.97), customers frequently misinterpret its relation to other prices. Participants in that study were more likely to go for a more expensive, larger cup of coffee when given a choice between a $1 cup and a $1.25 cup, than when given a choice between a 95 cent cup and a $1.20 cup. Doctoral student Juhna Kim, who led the study, said that customers perceived price differentials like $19.99 to $25 as being a bigger leap than $20 to $26, when the opposite is true.