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A/B Testing Idea #118 - Give discounts which are simple to calculate
Description
Using precise, non-rounded numbers is a good way of making your prices seem smaller but one occasion when you don't want to do this is when you're offering discounts. You want your discounts to seem as significant and interesting as possible and so it is more effective to use rounded numbers to ensure these discounts are easy to compute.
People will see the difference between $4.97 and $3.97 as being smaller than between $5 and $4 simply because they can't compute the difference as easily or quickly and because precise numbers lend themselves to smaller values.
Inspired by Nick Kolenda
Principles
- Perceived Value Pricing (Lee & Zhao, 2014; Poundstone, 2010; Mazumdar; Raj; Sinha, 2005; Thomas; Simon; Kadiyali, 2007)
- Cognitive Ease (Khaneman, 2011)
- Magnitude Encoding Process (Oppenheimer; LeBoeuf & Brewer, 2007; Coulter & Coulter, 2005; Thomas & Morwitz, 2005)
The Research
Perceived Value Pricing
Perceived Value Pricing explains how our perceptions of a price and its value can be altered depending on how it is presented to us.
Cognitive Ease
The ease with which our brain processes information and how the level of ease impacts how positively we feel about something.
Magnitude Encoding Process
The way in which we perceive pricing can be affected by the way in which it is presented to us and so making use of size, placement or colour, for example, can influence how small the price appears to be.
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