Relativity Bias – How the Brain Sees Numbers

• How do you create price options to sell more?
• Why do consumers need to compare prices to decide?

Try this thought experiment. You want a speaker. Looking through your Sunday newspaper ads, you see one advertised for $20 at a nearby retailer. Then, you see another ad for the identical speaker, but for only $5, a $15 discount. The store with the lower price is 20 miles away. Would you drive 20 miles to save $15? Researchers found that 80% of consumers would make the drive.

Now, think about shopping for a laptop computer. The nearby store has one you like for $1,000. The store that is 20 miles away offers the same model for $985, $15 cheaper. Would you make the 20-mile drive to save $15? Researchers found that 80% would not.

The value of the discount is relative to the total cost of the item. For the speaker, $15 was a 75% discount. For the computer, it was only a 1.5% discount.

Values, Discounts and Prices Are All Relative

95% of all consumer decisions are made quickly and unconsciously by the fast-thinking emotional brain. It is difficult for consumers to make an evaluation without a reference point to compare to. The fast-thinking mind sees the value by making a comparison to the reference which is the price of the speaker or the laptop.

In marketing, there are several ways you can use this relativity comparison tendency. They can influence consumers and trigger buying decisions:

• Avoid Easy Calculations When Offering Discounts – Even the fast-thinking, intuitive brain can instantly calculate a 10% discount. It moves an imaginary decimal point one place to the left. The actual discount amount is immediately known. If the discount is set at 11% or 12%, though, that calculation doesn’t happen as quickly.
  Keeping the brain from recognizing the actual amount immediately can trigger a commitment more often.
  Using more complex numbers in discounts works better in increasing sales.
• Sell More by Offering a Higher Priced Product at the Same Time – Showing two similar products side-by-side satisfies the fast-thinking brain’s need to compare. By introducing a higher priced product, you add a reference point for customers to compare.
  The more expensive product often makes the cheaper one look like a great deal.
  Amazon uses this sales technique on almost every product detail page.
• Rounding Down Helps the Brain Compare Prices Instantly – The fast-thinking, decision-making brain makes only rough comparisons. It performs an unconscious rounding down of prices. For example, it sees $189 as a significantly lower price than $211. Similarly, a $16,995 car price is seen as a real bargain, compared to $18,200.
  This principle has been used for many decades.
  Neuroscientists, through research, know why it works.
• Actual Discount Amounts Are More Effective Than Percentages – At decision-making time, percentage discounts can confuse the intuitive brain. Often, such discounts will divert from the decision as the consumer tries to do the calculations by using the slower-thinking parts of the brain.
  Instead, put the discount in actual dollar amounts.
  $500 Off! Immediately identifies the amount saved and can lead to a quick, intuitive purchase decision.
• Show a Previous Price with the Current Lower Price – You’ll sell more of a product if you show its regular price along with the current sale price. The emotional, unconscious brain will always do a fast comparison and identify the discounted price as a bargain.
  As a trigger for an immediate decision, adding a time deadline activates both the relativity bias and the loss aversion bias for even more brain-aware effectiveness.
  This sales technique is widely used in infomercials.
• Sell More Mid-Priced Items by Showing Three Products – Consumers like to see comparative prices. Too many choices, however, can block buying decisions.
  The intuitive brain can handle three items for comparison easily.
  Studies have shown that consumers decide to purchase an item more often if its price is between lower and higher-priced items. The price comparison happens instantly. The mid-priced item is seen as the best value of the three. That’s the relativity cognitive bias at work.

Understanding Common Cognitive Tendencies Boosts Sales

The examples shown above are just some of the ways Neuromarketers can help online sales of products and services. The relativity bias is just one tool that can help you outsmart your competition. Often, more than one tendency in the brain to act quickly can be used at the same time. That amplifies the effect. A comprehensive Neuromarketing strategy, applied throughout your internet marketing will ensure your success. As the Midwest’s only Neuromarketing consulting firm that specializes in applying Neuroscience to Sales and Marketing, we can help you achieve your goals. Contact us to get the sales conversation started.