Showing posts with label Economist. Show all posts
Showing posts with label Economist. Show all posts

Jul 11, 2012

Is It Cheaper

When offered the possibility of 33% off a product or the same product with 33% more quantity, which would you choose?

The Economist sums up the results of a new study published in the Journal of Marketing, which reveals that most consumers view these options as essentially the same proposition, but they are not. The discount is by far the better deal. The Economist says, most shoppers don’t realize that a “50% increase in quantity is the same as a 33% discount in price.”

In one part of the study, the University of Minnesota’s Carlson School of Management, asked undergraduate students to evaluate two deals on loose coffee beans, one with 33% more beans for free and the other at 33% off the price. The students viewed the offers as equal.

The initial price is $10 for 10 oz. of coffee beans or $1 per oz. An extra 33% more free beans would bring the total up to 13.3 oz. for $10. That $10 divided by 13.3 oz. give us a unit price of $0.75 per oz. With a 33% discount off the initial offer, though, the proposition becomes $6.67 for 10 oz., for a unit price of $0.67 per oz.

In another marketing experiment involving hand lotion in an actual store, researchers sold 73% more when it came in a bonus pack than when it was priced at a discount with the same exact unit price. Caveat Emptor and go for the discount.