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Which is better: Same amount for cheaper price, or more for same price?

By Bill Gephardt | Posted - Nov 15th, 2013 @ 10:09am

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SALT LAKE CITY — When you see a sale sign, would you rather it say you're getting the same amount of product for a cheaper price, or you're getting more product for the same price you usually pay?

A new survey shows shoppers overwhelmingly assume the second option is a better value, even though it's not.

Which is the better deal, a 33-percent discount on something or getting 33 percent more for free? A study published in the Journal of Marketing found most of us consider them equal.

"Thirty-three percent more is not mathematically the best response," said Himanshu Mishra, consumer behavior expert and associate professor of marketing at the University of Utah.

Mishra showed us how the math works. To keep it simple, let's say the standard cost for three quarts of coffee is $1. With 33 percent more free, you'll get four quarts for $1. That adds up to 25 cents per quart.

If you go with the 33-percent discount, you'll get three quarts for 66 cents. That's 22 cents per quart.

Many of us simply skip the math because we love the word "free."

"So when you compare per unit price, 33-percent discount gives you a better per-unit price than 33 percent more quantity," Mishra explained.

The study found shoppers much prefer getting something free to getting something cheaper, even if the second option is a better deal. Is it because we're bad at math? For some people, maybe, Mishra said. He also believes many of us simply skip the math because we love the word free.

"It has this emotional reaction. I'm getting something for free. This is the best deal possible," he said.

His colleague, Arul Mishra, said, "It seems so attractive. People purposefully don't do the math."

Arul Mishra said that's why many people buy their dream car, home or other big ticket item they can't afford. It's not because they're bad at math. It's because if they did the calculations, it would add up to a mistake.

"They would have to exert self-control," she said. "They would have to stop themselves from buying the product."


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