Why did value perception of a discount increase 16.3% by changing from “20% off” to “$30 off” for the same $150 jacket? How does the exact same discount produce such different results? And why does this pattern reverse completely for lower-priced items?
The Finding: Show the Bigger Number
Researchers from EGADE Business School and Babson College ran controlled experiments testing how discount framing affects consumer decisions. They examined the same discounts presented two ways - as percentages and as dollar amounts - across different price points.
The results revealed a clean, consistent pattern. For products priced above 100 in any currency, dollar-off discounts dramatically outperformed percentage-off equivalents. When a jacket priced at 480 pesos showed "120 pesos off" instead of "25% off," perceived value increased 12.4% and purchase likelihood jumped 16.3%.
For products priced below 100, the pattern completely reversed. When balloons priced at 48 pesos displayed "25% off" instead of "12 pesos off," perceived value increased 7.8% and purchase likelihood rose 11.1%.
The threshold of 100 held across currencies - dollars, euros, pesos. This consistency pointed to a psychological mechanism rather than an economic one.
From this research emerged what marketing professor Jonah Berger calls the Rule of 100: Above 100, show the dollar amount. Below 100, show the percentage. Why? Because consumers consistently respond more strongly to whichever number appears larger.
A $150 item with a 20% discount should display as "$30 off" because 30 is larger than 20. An $80 item with the same 20% discount should display as "20% off" because 20 is larger than 16. Same discount percentage. Different optimal presentation. The determining factor is which format produces the bigger number.
One outdoor vehicle parts retailer implemented this approach and ran A/B tests comparing their previous universal percentage format against the Rule of 100 dynamic format. The dynamic approach increased both cart additions and conversion rates. Most of their products exceeded $100, meaning discounts like "$45 off" replaced "15% off" - and despite mathematical equivalence, the dollar format drove stronger response.
The Why: How Your Brain Processes Discount Numbers
The mechanism driving this effect lies in numerical cognition - specifically, how humans process numerical information under cognitive load.
When evaluating a discount, most consumers don't perform the calculation to verify equivalence between percentage and dollar formats. Instead, they rely on what researchers call the "absolute number heuristic" - using the raw number they see as a fast signal of value.
Here's what happens in your brain. When you see "10% off" on a $200 product, your mind anchors on the number 10. This number becomes your psychological reference point for the discount's magnitude. The actual savings of $20 exists somewhere in your awareness, but the number 10 dominates your intuitive sense of the deal's size.
Show the same discount as "$20 off" and your brain anchors on 20 instead. The higher number creates a stronger perception of value, even though both represent identical economic outcomes. You're not being fooled - you could calculate that they're the same if you invested the cognitive effort. But most shopping decisions don't warrant that effort.
Research by Thomas and Morwitz on heuristics in numerical cognition explains why. During price evaluation, absolute discounts (like $20 off) are represented on a mental number line and compared directly. This process is fast and intuitive. Percentage discounts (like 10% off) require arithmetic operations to convert to actual savings. This process is slower and more effortful.
When cognitive resources are limited - which they typically are during shopping - people default to the processing path that requires less effort. The absolute number provides that easier path.
This reflects broader patterns in how humans evolved to process quantities. Our approximate number system responds to the magnitude of numbers we encounter, not to the calculations those numbers represent. We're wired to quickly estimate "is this more or less" rather than to compute exact equivalences.
The number 30 simply feels bigger than 20. And when you're evaluating a discount, bigger numbers signal better deals - even when logic says they're equivalent. Chen, Monroe, and Lou captured this perfectly in their research: "A $1,000 discount on a $20,000 automobile appears significant in terms of dollar savings, but the equivalent 5% discount seems less attractive."
Why does 100 serve as the critical threshold? It's pure mathematics. Below 100, the percentage number exceeds the dollar equivalent. A 20% discount on an $80 item equals $16 - and 20 is larger than 16. Above 100, the dollar amount exceeds the percentage. A 20% discount on a $120 item equals $24 - and 24 is larger than 20.
The threshold exists because it's the break-even point where the two formats produce equal numbers. Consumer psychology responds to that mathematical reality by consistently preferring whichever format generates the larger numeral.
What This Means for Marketing
The Rule of 100 provides a straightforward implementation framework with measurable impact on conversion and revenue.
For e-commerce platforms, implement conditional logic that automatically selects discount format based on product price. Items under $100 display percentage discounts. Items over $100 display dollar discounts. This requires minimal development - a simple if/then statement in your pricing display code.
Email campaigns, paid ads, and promotional materials should feature different discount formats depending on which products you're highlighting. When promoting lower-priced items from your catalog, emphasize percentage savings. When promoting higher-priced items, emphasize dollar savings.
In-Store requires more manual implementation but follows the same logic. Shelf tags, promotional endcaps, and checkout displays should apply the Rule of 100 by price tier. For category-wide sales spanning multiple price points, this may require differentiated signage depending on the price point.
Abandoned cart emails represent high-intent touchpoints where discount framing can meaningfully impact recovery rates. Examine the cart value and items, then frame your discount offer accordingly. For a cart with items totaling $450, "$45 off your cart" (10% discount) likely outperforms "10% off your purchase."
When planning seasonal sales, promotional events, or loyalty rewards, consider how discount depth interacts with price points.
Measure not just conversion rate but also average order value, profit per transaction, and return rates. Stronger initial conversion sometimes comes with higher buyer's remorse if customers feel they were pushed into a decision. The Rule of 100 shouldn't create that dynamic since the discount is genuine, but monitor for it nonetheless.
Implement the Rule of 100 systematically across all channels – but consistently. If a customer sees "20% off" in an email for a $150 item, then sees "$30 off" on the product page, the inconsistency raises questions even though both are accurate. Unified formatting builds confidence.
The Rule of 100 applies across currencies because the effect is psychological rather than economic. Whether you're pricing in dollars, euros, pounds, pesos, or yen, the threshold remains 100 in that currency.
But there are some things to consider.
Grocery and commodity items show enhanced effects because customers have strong reference prices. Someone who buys milk weekly knows the normal price precisely. "$1 off" provides immediate context. "20% off" requires mental calculation against their reference price. For frequently purchased items, absolute dollar amounts might communicate value more efficiently.
Budget-conscious customer segments show stronger preference for dollar amounts even on lower-priced items. Research by Choi and Mattila found that consumers with low feelings of personal power are skeptical of percentage discounts, preferring the concrete verifiability of dollar savings. If your audience skews toward tight-budget shoppers, consider favoring absolute amounts more broadly.
Experiential purchases (travel, events, dining experiences) sometimes respond differently than product purchases. The intangible nature of experiences can make percentage frames feel less transactional. Test both formats for experience-based offerings.
Therefore, start A/B testing with products clustered near the $100 threshold where the effect should be most pronounced. Items priced $80-$120 provide the clearest test cases because they're close to the break-even point. Monitor performance metrics - conversion rate, average order value, customer acquisition cost, return rate - to verify expected improvements.
References
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