Psychology has always intrigued me. Our brain is this complex mechanism making decisions for us 24×7. Now the thing I like the most is how this super amazing brain of ours can be influenced. You marketing folks out there know what I’m talking about. The best companies out there are the very best because they know how to market their product. Of course, you need to have a good product or service in the first place – that’s a given. But its the subtle cues in the customer’s shopping journey that will push them towards conversion. This week I came across one such cue –The Rule of 100.
The Rule of 100 is what Jonah Berger, a professor at the Wharton School of Business talks about in his book Contagious. It’s a fabulous take on how discounts are perceived by the consumer when they are under 100. Now this 100 can be anything – $ amount, size, quantity etc. The rule says if the value is under a 100, a percentage discount seems more attractive than absolute discount. This behavior however flips when the value is over 100.
For instance, let’s say the $25 headphones that were always on your wishlist are on sale. The new price is $20. Now there are two distinct ways of displaying this discount – 20% off headphones or $5 off headphones. What’s more attractive?
But what if the same headphones costed $500 and are now on sale for $400? – 20% off headphones or $100 off headphones.
I have seen something similar happen with ride sharing apps. This is what I see when Uber and Lyft give me discounts.
Notice the 30% off and 25%? In reality, I’m saving like a dollar or two, but percentage discounts make the deal sound a lot better than it probably is.
I have seen both these companies experiment a LOT with display messaging. I have seen both % off and $ off pop up in the last couple of years and I’m pretty sure that the A/B tests they ran had % off as the winner. Uber and Lyft were just examples and there are probably tons of companies out there doing the same thing as part of their growth strategy. The next time you get a push notification/promo email offering you a discount, keep a look out for this Rule of 100.
This blog is part of the 52 Weeks of Product series.