Discount Your Way To Higher Conversion Rates
Which do customers find more attractive, 40% OFF or $5.00 OFF? A study conducted in the July 2007 issue of Journal of Marketing research asks that exact question.
The research discovered that customers are more persuaded by a percentage off vs. a dollar amount. This makes sense from a persuasive design perspective. Simply put, the number 40 is bigger than the number 5 in 40% off vs. $5.00 off.
Yes it really is that simple.
Offering a specific dollar amount off of a product with a coupon can change a customer’s perception of the product’s value. When buyers are presented with a percentage discount, a specific bargain price doesn’t ever enter their mind. Where as a specific dollar amount off like, the $5.00 OFF offer creates a specific dollar amount comparison to the total cost of the product. The discount could be the exact same dollar discount, but the percentage will be perceived as bigger. (Obviously that is dependent on the total price of your product.) Customers simply won’t do the math (with the exception of 10 percent or 50 percent offers, where the calculations are easier) and therefore, the percentage off seems like a greater savings to most shoppers.
We can also see the same persuasion perception happen on offers that are stated as a percentage range like. 20 – 50% OFF. Psychologically people have a tendency to assume they will get the lowest discount and think they will get 20% off not 50% or any range in-between. Perhaps consumers have developed a thick skin from years of being marketed to or maybe most people are pessimists, I’m not sure. Either way there are some significant insights you can take away and apply to online conversion rate marketing.
Don’t believe me? One easy way to apply this principle online is to conduct an A/B split test for an adwords campaign. Simply run two separate consecutive ad tests through ad words.
Here’s how to do it.
- Choose a one week 7 day period that does not have any holidays in it and run version one of your ad copy with 20 – 50% OFF.
- Immediately follow up that test for another 7 days again with no holidays in this 7 day run and be sure to include the same days as the previous test (Thursday through Wednesday vs. Thursday through Wednesday, etc.) and run version two of your ad copy with the 50% OFF offer.
Your success metric for this test will be the (CTR) Click Through Rate. CTR = total clicks / total impressions. Think of the CTR as a visitor converting from your ad to your landing page. CTR is a the proper metric for this test since your testing variable is the ad copy not the landing page or final sale. You simply want to find which offer drives the most traffic to your landing page.
Here are some examples on how to use the percentage discount offer in your ad words ad.
20 – 50% OFF Shoes
Great Deals on Clearance Items. 20 – 50% OFF Sale items won’t last. Shop Now.
Vs.
50% OFF Shoes
Great Deals on Clearance Items. 50% OFF Sale items won’t last. Shop Now.
In this example the only variable was the discount price since we are testing to answer both the which and the what. Which AdWords Ad will generate the highest CTR and What element can we attribute the difference to. Depending on your test goals, time, resources and business goals you may not always be concerned with answering what element attributed to the difference. Some times the most important thing is getting the highest conversion rate increase as quickly as possible.
You can also conduct the same test with a percentage discount vs. a dollar amount (40% OFF vs. $5.00 OFF) as the variable. You may be surprised at what works for your prospects, it’s not always the most obvious or what would be the best offer to you. Remember, your customers don’t think like you do. As I say to all my clients, let’s test it.
Tags: conversion rate marketing, conversion rate optimization