“Oh no, this tea is only 40% off. Let's take this one. it was 20% off and then the price was additionally reduced by 25%. Better deal!“
– Is your math also this ... bad? Read this article. I'll help.
This article is inspired by The Illusion of Choice. A book written by Richard Shotton about cognitive biases in marketing and everyday life. Read another article from this series.
Imagine...
It's that time of the year. You're saving money for Christmas presents. So you're very interested in sales right now. You enter the supermarket, take your basket and head to the tea section. You're in luck. Three brands are on sale. All of them are for the same price now.
However, you're strangely drawn toward one particular brand that just seems like a better deal than the rest. (No, logically, it does not make any sense.)
Which tea you're feeling the most?
A. The one with talking pineapple on the label
B. The one directly under the supermarket light. It's like God picked that one for you.
C. The one with the reduced price written in the smallest font of the three.
Not sure about the answer? Maybe the following experiment will help.
In 1994, Veronica Denes-Raj and Seymour Epstein from the University of Massachusetts offered people two bowls of mixed red and white jellybeans.
Everyone had one chance to draw a jellybean. If they were lucky and pulled the red one, they won $1.
The first bowl was smaller. It contained nine white jellybeans and one red: 10 jellybeans in total.
The second bowl contained 100 jellybeans: 92 white ones and eight red ones.
The participants could choose a bowl they wanted to draw from.
Can you guess which one would better their chances? Let me share the result first.
Nearly half of the participants went with a larger bowl. Yet, statistically speaking, the first bowl would be a better choice.
How come? With the first bowl, you have a 1 in 10 chance to win. That's a 10% chance. With the second, you have only an 8 in 100 chance, which is an 8% chance.
The researchers have repeated the experiment many times. With 5 to 9 red jelly beans in the larger bowl. Despite the small amends, they were still making sure that the larger bowl was a worse option.
And the results? Silly 82% of participants chose the larger bowl at least once.
Why did so many participants go with the wrong option? Researchers asked them the very same question.
Many people replied that “they knew the probabilities were against them logically, but they still felt they have better chances if there were more red jellybeans in the bowl.”
The Denominator Effect
Nobel prize laureate Daniel Kahneman calls this way of thinking The Denominator Effect (also known as The Denominator Neglect). It describes that:
We tend to focus on the headline numbers instead of what the numbers represent.
We compare one red jelly bean in the smaller bowl with eight jelly beans in the larger one instead of the 10% success rate with the 8% success rate. It’s because the number of jellybeans was given, and we had to count the probabilities for ourselves.
Let’s say it would be the other way around. You have two jars. The researchers would tell you that with a smaller bowl, you have a 10% chance to win, and with a bigger one, you have an 8% chance to win.
You might then count for yourselves that it means that there’s one jellybean in a
smaller bowl and eight jellybeans in a bigger one.
I’m certain this time, everyone would go for the bowl with a higher probability of winning. Seems so obvious now, right?
Use the effect to your advantage
People mostly concentrate on the number you present them first. Let's see how we can benefit from that.
Make your numbers look bigger
Eva González from the EGADE Business School in Mexico showed two groups of people a jacket for 480 pesos. The first group saw the jacket being discounted by 120 pesos. The other one was presented with a 25% sale.
If you think about it, the price was reduced by the same amount in both groups ( 25% of 480 is 120). But still, the first group (120 pesos) saw the sale as a 12% better deal than the second group (25% price reduction).
It's because, as for sales, the higher the number you present, the better the deal seems to be. Yes, that's very... obvious.
By the way, marketers. Here are some other examples of how to make your sales look bigger:
Instead of a 40% sale, do a 20% sale and a 25% additional sale. Even though in absolute numbers we're talking about the same price reduction, people would perceive the second option as a 45% sale (20+25, right?). It's because of our denominator effect.
Make the first sale smaller. Do a 15% sale first and then an additional 45% sale for example. Not the other way around! People always compare the second number with the first. If the second number is higher, the sale seems better. This works thanks to the anchoring effect.
Saying the price “was higher by 31%” is more effective than saying the price “is now by 31% lower”. Probably, it's because there is a loss aversion at play.
Put your sale price in a smaller font than your original price. I know it sounds counterintuitive, but people connect the size of the font with how expensive the product is. So the smaller the font, the “smaller“ the price. Thank the power of context.
The numbers are here to serve you
Always choose the number that suits you best. If you want to look taller, share your height in centimetres, not feet and inches. If you want to feel slimmer, communicate your weight in kilograms, not pounds.
(Okay, now it seems I'm a huge fan of the central European measurement system. Which, to be honest, I am. It makes the most sense of all, admit it.)
Anyways, to put it simply: before sharing any number, think about whether you want it to be perceived as a lot or a little.
For example, I know I have to tell you that it will only take two and a half minutes to read this article. Seems so short!
On the other hand, stating you'll need 154 seconds to read it would feel way too intimidating. I would not want that. Nobody has time to spare, right? Especially before Christmas.
Happy holidays, folks!
Correct answer: C. The one with the reduced price written in the smallest font of the three.
Source: Richard Shotton | The Illusion of Choice
Read more: You’ll need 382 seconds to read this article.
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