like a better offer. The laptop seems like a better deal when it is $200 off
rather than 10 percent off.
A simple way to figure out which discount frame
seems larger is by using
something called the Rule of 100.
If the product’s price is less than $100, the Rule of 100 says that
percentage discounts will seem larger. For a $30 T-shirt or a $15 entrée,
even a $3 discount is still a relatively small number. But percentagewise (10
percent or 20 percent), that same discount looks much bigger.
If the product’s price is more than $100, the opposite is true. Numerical
discounts will seem larger. Take a $750 vacation package or the $2,000
laptop. While a 10 percent discount may seem like a relatively small
number, it immediately seems much bigger when translated into dollars
($75 or $200).
So when deciding how good a promotional offer really is, or how to
frame a promotional offer to make it better, use the Rule of 100. Think
about where the price falls relative to $100 and how that shifts whether
absolute or relative discounts seem more attractive.
—————
One last point about promotional offers is that the practical value is more
effective the easier it is for people to see. Take the shopper discount cards
that you get at your local grocery store or pharmacy. These cards are
certainly useful. They save consumers money and sometimes even give
them free gifts if they have accumulated enough purchases. But one
problem is that the practical value is not very visible. The only information
people get about how much they saved is hidden among a half dozen other
pieces of information on a lengthy receipt. And given that most people
don’t show their receipts to others, it’s unlikely that anyone but the person
who used the card will see how much they saved. That makes it less likely
that the information will be contagious.
But what if stores made the practical value easier to see? They could put
up a sign at checkout that shows other people in line how much the person
checking out saved. Or the store might ring a bell every time someone
saved more than twenty-five dollars. This would make two things happen.
First, people would get a better sense of how much they could save by
getting the card, encouraging anyone who doesn’t have one yet to get one.
Second, it would allow people to see the impressive amounts that some
other shoppers were able to save, encouraging them to transmit these
remarkable stories of practical value. As discussed in the Public chapter, it’s
hard to talk about something you can’t see.
MORE
THAN MONEY
I am terrible at investing. Too many options, too much daily volatility, and
too much risk. I’d rather keep my money in a cardboard box under my bed
than put it in some mutual fund that could lose money. The first time I
bought stocks I barely dipped my toe in. I picked two or three that seemed
like good long-term investments based on being strong brands and tried to
leave it at that.
But my curiosity got the best of me. I frantically checked every day how
each stock was doing. A dollar up today? Huge success! Thirty-five cents
down the next day? Hopelessly despondent and considering giving up
investing ever again.
Needless to say I needed help. So when it came time to put money in my
401(k)
for work, I picked some safe index funds that track the stock market.
Soon after, Vanguard, the firm that manages my retirement plan, sent me
a short e-mail asking if I’d like to receive its monthly newsletter,
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