The Rule of 100 [Post 21]

Please leave your Texas Instruments calculator tucked away for this one and go with your gut. We will disclose the math shortly.

Say there’s a $30 jacket you like, would you prefer 20% off or $6 off?

How about a $180 wristwatch for your mother, does $54 off or 30% off sound better?

If you picked 20% off in question 1 and $54 off in question 2, you fell victim to the rule of 100. The jacket was $24 total in both scenarios and the watch for mom was ultimately $126 with either discount.

The Rule of 100 is a general rule for how people view discounts above and below $100. For small items it seems like % discounts are a better deal than a few dollars off and for big-ticket items the large $ value off grabs our attention more than a %.

Do I expect any of us to ever be in a scenario where we should decide between a $ or % discount? Never (but it does sound like it could be a game show).

I do, however, believe it is important to be aware of how marketing can impact our decisions. RetailMeNot’s research1 has found that 2 in 3 people admit they have bought something because they had a coupon (discount) and not because they initially planned to buy it.

It’s okay to occasionally give in to the allure of a good deal, but having awareness for shrewd marketing and a hint of discipline to walk away from unnecessary purchases can prove valuable if you find yourself in similar scenarios often.

1. Namogoo. (2021, May 31). The Psychology of Discounts: How Consumers React to Different Pricing Strategies.

https://www.namogoo.com/blog/consumer-behavior-psychology/psychology-of-discounts/