50% Off, 2 for 1, and other Strategies - What works when?

Price promotions are a common sales tactic, especially in tough times.

Discounts, Buy-one-Get-one free and Buy-2-get 50% off are reasonably standard price promotions in the retail sector.

“50% off”, “Buy-one-Get–one Free” and “Buy-2-get 50% off” all result in the customer paying the same price. However in a study of supermarket price promotions only 18% of people recognised that the deals resulted in paying the same amount at the checkout.

So which one generates more sales?

Psychologists have found that 49% of customers respond best to “50% off”, followed by 21% preferring “Buy-one-Get–one Free” and only 4% preferring “Buy-2-get 50% off”.

However if the sale item was something that could be stocked up, that is it was regularly used and non-perishable such as tissues or laundry detergent, customers perceived greater value from “Buy-one-Get–one Free”.

The reason “Buy-one-Get–one Free” is perceived more favourably than “Buy-2-get 50% off” is simple. Customers perceive “Buy-one-Get–one Free” as a gain. Whereas “Buy-2-get 50% off” is perceived as being forced to buy more in order to get the discount.

But researchers have found that for higher priced items it is more effective to state the dollar value of the saving rather than the percentage amount. For example on a $1,000 item “50% off” equates to $500 off. This is a significant amount of money and advertising $500 off is a large incentive. However, “50% off” a $2 item equates to a saving of $1. In that instance “50% off” clearly sounds more than $1.

What price promotion is right for a particular product?

Businesses will often develop price marketing strategies based on required sales turnover or on how quickly they need to move a product. Buy-one-Get–one Free is often a favourite way for retailers to decrease unit stock quantities. But for products where people do not see value in receiving the second item, 50% is likely to move more product more quickly.

The below decision tree has been developed, based on the available research, to help you determine which price strategy may be right for a particular product.

But a word of caution – giving products for free can be risky.

Source: Sinha, I, & Smith, M.F (2000). Consumers’ perceptions of promotional framing of price. Psychology & Marketing, Vol. 17(3), pp.257-275.

Li, S., Sun, Y., & Wang, Y. (2007). 50% Off or Buy One Get one Free? Fame Preference as a Function of Consumable Nature in Diary Products. Journal of Social Psychology, vol 147(4), pp. 413-421.