The Psychology of Price Promotions – 3 Tips to Make Them Work for You

The Psychology of Price Promotions – 3 Tips to Make Them Work for You
11/21/2018 Gustavo Gustazos


We all like getting more for less. Our love for savings is why 97 percent of U.S. consumers look for deals when they shop (Hawk Incentives), 92 percent are coupon users (RetailMeNot), and 83 percent make unplanned purchases based on discounts (Market Track). Price promotions save consumers $3.1 billion a year (NCH Marketing Services) and generate billions more in new or additional business for the companies that use them.

Millennials are big fans of coupons: 84 percent use coupon codes when shopping online, with 76 percent waiting for a discount before buying something (CouponFollow).Even wealthy shoppers are bargain hunters: 90 percent of affluent shoppers ($100K+ household income) use discount coupons (Valassis).

Savvy marketers use price promotions, such as the ones listed below, to attract new customers, encourage repeat business and increase sales.

  • Free products
  • Free shipping
  • Dollar amount off
  • Percentage off
  • Two for one
  • Bundling
  • Others

Designing an Effective Price Promotion

Before you start offering discounts, you should take the following basic steps:

  • Define your goal. Do you want to move stock, attract new customers, meet a sales target?
  • Research what your competition is doing.
  • Analyze your sales, gross profit margins, break-even points, etc. to determine the best discount strategy.
  • Design a price promotion and choose a marketing platform for it.

As you work on this last step, consider these three crucial tips.

1. Make It Urgent

Price promotions work on the principle of urgency because discounts typically are available for a limited amount of time. A deadline or expiration date urges shoppers to make their purchase within that period of time or miss out on the savings.

2. Consider Dollar off vs. Percentage off

While different price promotions work for different shoppers at different times and under different circumstances, consumers tend to favor dollars-off over percentage-off discounts.

A study by outdoor wear company Evogear found that a $50-off coupon produced 170 percent more revenue and had 72 percent higher conversion rate than a 15 percent-off coupon, even though the final discounted price was the same for both offers.

The company attributed the results to two factors:

  • The customers perceived the dollar-off promotion as having more value.
  • The dollar amount offer was simpler and easier to understand, as it didn’t require customers to do the math.

the offer that seems larger to shoppers is the one that performs best

In general, the offer that seems larger to shoppers is the one that performs best. With 50 being a higher number than 15, customers assumed the former was the better offer.

Discounts also are relative. For example, consumers consider $10 off a $100 product as less than $10 off a $25 item even though the discount—$10—is exactly the same.

3. Choose Your Words Wisely

The wording used in price promotions affects how shoppers perceive them. For instance, “get $10 off” emphasizes a gain of $10, while “save $10” emphasizes avoiding a loss of $10. Consumers focused on gaining something will prefer the first one, while those focused on avoiding loss will prefer the second one. Companies should test different ways of presenting their discounts to find out which ones work better with their customers.

test different ways of presenting discounts

Symbols also matter. Marketing experts recommend reducing or dropping the dollar sign in price promotions and advertisements because the symbol reminds shoppers of the pain of paying for something and causes them to spend less (Yang, Kimes, & Sessarego).


Benefits of Price Promotions

There are many pros to using price promotions:

  • New customers that would otherwise never try your product or service.
  • Shoppers expect discounts, so getting them makes them happy and more likely to buy from you.
  • Repeat business from existing customers.
  • Increased sales volume and revenue from cross-selling and upselling.
  • Enhanced brand awareness.

The one con of discount results from overusing them. Back-to-back discounts make shoppers unwilling to paying full price for your products or services. Carefully design your price promotion to boost your sales, not hurt them.

Start Here

The right price promotion can be a tipping point for your business, and Gustazos can help you get there.

Gustazos is the No. 1 daily deals website in the Caribbean, supported by a huge database of social media followers and email subscribers. Our cost-effective marketing tool provides unmatched access to ready-to-buy customers, boosts brand awareness, generates sales and drives the local digital economy.


We can help you come up with the best discount strategy and promo for your business. Let’s talk.


Sources: Entrepreneur Magazine, Statista, Forbes, Yoast, AccountingWEB, Access Development


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