price psychology

Price Psychology: Making Discounts Seem Like the Best Deal Possible

Price psychology is a fascinating area of research. How do people think about prices? Can small changes to the way a price looks affect whether or not people will make the purchase? A while ago, I posted an article and made a YouTube video about five amazing examples of price psychology. But there’s always more to learn!

Last week, the website Highbrow launched my free 10-day email course about price psychology. Check it out! Every day you get a short email explaining a surprising effect in price psychology, revealed by real scientific experiments. (In case you missed it, check out my other course on Highbrow: “A Quick Introduction to Social Psychology“).

This week on the blog, I thought I’d share one of the lessons from that course. So strap in and discover what psychological science has to say about offering discounts in the most appealing way possible.

Price Psychology and Offering a Discount

price psychology discountWhen you’re presented with a discount, it’s only natural that you would figure out how much of a discount you’re getting to decide whether it’s a good deal of not. The bigger the difference between the original price and the sale price, the better the deal!

Research in price psychology has shown many ways in which you can make that difference feel bigger, which is what consumers want to see! For example, font sizes can help make a discount feel bigger. When the sale price is printed in a smaller font than the regular price, people see it as a bigger discount.

There’s another way to make discount seem better, and it takes advantage of a simple fact: most people don’t like doing math problems! This means that anything that makes the calculation just a little more difficult can affect how people respond to numbers.

A Discount Should Be Easy To Calculate

The key lesson here is that when the difference is easy to calculate, the discount feels bigger than when the difference is more difficult to calculate.

So if I’m discounting a $10 product down to $7, you can easily calculate the $3 difference. Good deal!

price2But if I’m discounting a $10.55 product down to $7.54, the calculation doesn’t happen as quickly. It’s not an impossible math problem, but it’s just a little trickier, which makes the discount seem minimal.

One study put this to the test and simply showed people a variety of discounts. The true amount of the discounts were the same, but some were easy to compute (e.g., $4.00 marked down to $3.00) and some were more difficult (e.g., $4.97 down to $3.96).

Not only were people quicker to respond to the easy-to-calculate discounts, but they saw the easy-to-calculate discounts as being bigger discounts than the difficult-to-calculate ones. In fact, this was the case even when the difficult ones were objectively better deals, albeit only slightly (e.g., $4.97 – $3.96 = $1.01).

Going Beyond Discounts

This goes beyond discounts, too. Think about when you’re comparing two brands of the same product. Sometimes there’s a brand you like, but it’s more expensive. So there’s a tradeoff, and you have to decide: does the difference in quality outweigh the difference in price?

The same researchers applied ease-of-computation to this scenario, too. They found that when the difference in price was easy to calculate, people went with the cheaper option because the difference in price feels bigger. But when the difference in price was more difficult to calculate, people went the more expensive, preferred brand. It’s because in this case, the difference in price felt smaller, making the brand preference ultimately win.

The point of this seems to be that people are easily bamboozled. When the math is just a little trickier, it can make the difference feel smaller.

For more, be sure to check out the free Highbrow course on Price Psychology or check out my full video course to go into more depth!

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