When marketers try to get customers to buy a product, they often provide a discount. Shopping carts let you create discount codes for a dollar amount or a percentage. Indeed, a discount can be effective.
But listen to this.
A team of researchers, led by Akshay Rao of the University of Minnesota’s Carlson School of Management, looked at consumers’ attitudes to discounting.
They offered either a 35%-off price discount on the regular price or a bonus pack of 50% more free. Economically, a bonus pack of 50% more free is equivalent to a price discount to 33.33% off.
How do you figure that?
If a product costs $1, then 33% off is $0.67. If you get 50% more for free, you get $1.50 worth for $1, which is also 33% off! But in most promotions, the base price ($1 in this example) isn’t shown and it turns out that most people aren’t very good at making the calculation.
What was the result?
The researchers, in several studies, found that shoppers much preferred getting something extra free to getting something cheaper, even when the discount was a slightly better deal.
So, which should you offer, discount or bonus?
How can you use this information?
Try rewording or reconfiguring your promotional offer. Instead of offering a discount, offer more for free. For example, I’ve had great success with 5 for the price of 4 when selling a series of training webinars.
Your result might be different with higher-priced products. After all, the research was done with mouthwash, toothpaste and other similarly-priced products. Someone might prefer to pay $67 for a $100 product when compared with paying $100 for $150 worth of products, just because $67 is less than $100 and you’re talking about a significant amount of money.
But try it and see what results you get, especially if your discounts aren’t working that well.
You can offer a free bonus instead of a discount. Perhaps they buy a coaching package and get a free training video or more personal time with you.
Or, instead of giving people a discount on a service you provide, offer more time for the same money. For example, you could offer 7 hours for the price of 6. It sounds more generous and you don’t want to discount your rate too often.
What types of promotional offers have worked well for you?