In our continuing quest for evidence-based marketing decisions, we conducted a scientific test on that very question for one of our clients.
Yes, scientific. We tested two versions of a postcard—one offering a $5 discount, the other offering a 20% discount—on upwards of 40,000 customers over a period of three years. Every other customer received one or the other version of the postcard. Other than the discount offer, the postcards were identical.
The results are in. Drum roll, please...
The 20% offer won. It consistently outsold the $5 offer by 2%.
Lest you scoff at 2%, multiply that over hundreds of thousands of customers for years and years. It adds up. Plus, for this client, the average customer spends $20 at at time. If you’re a math wiz, you have already figured out that 20% of $20 is $4. And if you’re even more of a math wiz, you may also have figured out that $4 is less than $5. About $1 less, to be more precise.
So by offering what is effectively a $4 instead of a $5 dollar discount, our client sells more, increases profits by an average of $1 per order, and gives his customers the deal they prefer.
This is a good example of the value of testing to see what works instead of assuming you know.
Now, don’t do anything rash, such as running off and changing all of your dollar-off to percentage-off deals. This is one finding for one company in one industry. The result may not hold across the board.
Please click COMMENTS above and let me know if you guessed right. Be honest. I know a thing or two about the reliability of self-reported data. Which is why this agency prefers testing to asking.