Why Discounted Prices Are Better Than Getting ‘Extra’ Product For Free

If you’ve ever wandered the cereal aisle, you’re probably used to seeing promos along the lines of “20 per cent more free!” While our brains interpret this as the same as getting 20 per cent off, actually getting 20 per cent off would be a better deal.

Picture: Mike Mozart

As The Atlantic explains, shoppers are pretty bad at maths. The “[X amount] extra!” is a common tactic used to put a number in our minds. The problem is, we’re not great at converting unit prices on the fly. Using coffee as an example, the site explains that getting X% extra for free is worse than getting that same percentage off of the total price:

You walk into a Starbucks and see two deals for a cup of coffee. The first deal offers 33% extra coffee. The second takes 33% off the regular price. What’s the better deal?

“They’re about equal!” you’d say, if you’re like the students who participated in a new study published in the Journal of Marketing. And you’d be wrong. The deals appear to be equivalent, but in fact, a 33% discount is the same as a 50 per cent increase in quantity. Maths time: Let’s say the standard coffee is $US1 for 3 quarts ($0.33 per quart). The first deal gets you 4 quarts for $1 ($0.25 per quart) and the second gets you 3 quarts for 66 cents ($.22 per quart).

Of course, stores don’t tend to offer both on the same product. Either you’ll see a 33 per cent off discount, or 33 per cent extra for free. However, competing products can. If one box of cereal offers a discount, and the other offers a bigger box for the usual price, the discount will probably be better. Unless the bigger box is bigger by a significant amount.

This sales method is doubly tricky as it convinces you that you need to buy more than you might have purchases otherwise. While most of us know that one of the best ways to save money at the store is to only buy what you need, getting a little extra for free seems like a better deal. However, it might not actually save you money, unless you’ve done the maths.

The 11 Ways That Consumers Are Hopeless at Maths [The Atlantic]