Consumers Prefer to Get More Rather than Pay Less – Because They’re Bad at Math

Is it better to get more or pay less? If you think they’re basically the same, you’re like most consumers. And, like most consumers, you’re wrong.

When offered the possibility of 33% off a product or the same product with 33% more quantity, which would you choose?

The Economist sums up the results of a new study published in the Journal of Marketing, which reveals that most consumers view these options as essentially the same proposition. But they’re not. The discount is by far the better deal. As the Economist puts it, because most shoppers are “useless at fractions,” they don’t realize that, for instance, a “50% increase in quantity is the same as a 33% discount in price.”

In one part of the study, Akshay Rao, the General Mills Chair in Marketing at the University of Minnesota’s Carlson School of Management, asked undergraduate students to evaluate two deals on loose coffee beans — one with 33% more beans for free, the other at 33% off the price. The students viewed the offers as six of one, half a dozen of the other.

But let’s do the math, using some easy round numbers for the sake of simplicity. Say the initial price is \$10 for 10 oz. of coffee beans. Hopefully, it’s obvious that the unit price is therefore \$1 per oz. An extra 33% more “free” beans would bring the total up to 13.3 oz. for \$10. That \$10 divided by 13.3 oz. give us a unit price of \$0.75 per oz. With a 33% discount off the initial offer, though, the proposition becomes \$6.67 for 10 oz., for a unit price of \$0.67 per oz.

Shoppers routinely bite on offers that are worse values because they do the math incorrectly, and also perhaps just because they’re infatuated with the idea of getting something extra for free. The prospect of receiving something for nothing has been demonstrated to make consumers do some pretty irrational things, including buying goods they otherwise wouldn’t have and being far more likely to order items online with free shipping, regardless of the overall expense.

It seems as if the psychology power of free may also make us worse at math. In another marketing experiment involving hand lotion in an actual store, researchers sold 73% more when it came in a bonus pack than when it was priced at a discount with the same exact unit price.

Researchers have a term for the phenomenon in which shoppers pay little attention to unit price. They call it “base-value neglect.” Neglect at your own peril.

Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

Evan

While I agree with the article in its entirety, it is probably worth

noting that buying the same product for \$0.75/oz is still a

better deal then \$1/oz, which is math I think most people are able to

do.

A tactic that is happening in supermarkets in Australia lately is to keep the price the same, but reduce the quantity per package, which seems a bit like bait and switch as if the price doesn't change, and the tin or package or whatever is roughly the same size, most people wont realise they're not getting as much as they use to for the same money.

The positive thing though is that supermarkets here are required to print the dollars per gram/litre (albeit usually in small print) so it is worthwhile keeping your eye on these.

The moral of the story: don't buy stuff you were not going to anyway just because it is "on special™".

Firozali A.Mulla

To be very honest in the poor state, the son when dad is keeping cash takes this, goes spend this on the booze and asks mother for more. Mother of course keeps on harping , "But he is the Apple of my eye, how can I refuse the money to him. These are his days to have fun" If that is fun I think mom and dad ought to take the cash and hide it. The idea is when you are poor you will ask anyone fro cash Mafia or the Martians if they have it.We're still waiting for the promised action on the hated Human Rights Act which Cam pledged to repeal when he got to Westminster. Remember Cam, this ECHR becomes compulsory EU law enshrined by the Lisbon Treaty, about which we were also promised a referendumh. Seems to me evrything about the EU and our relationship with it is clouded in broken promises, lies and even more lies. So, anything I read about changing relationships is taken with a fistful of salt, rather than just the usual pinch. At some point we must cut our losses and get out. The sooner the better for the long suffering taxpayers of this country, that's for sure. I thank you Firozali A.Mulla DBA

Jeremy Toeman

Good article, but I'm surprised you didn't include Loss Aversion in part of the analysis.  It's not *just* that people are bad at math, it's *also* that people are bad at assessing the inherent value of loss versus gain.  More here: http://en.wikipedia.org/wiki/L...

Sudeep Sjb Rana

because people attract by visibility of opportunity rather than do  analysis of hidden opportunity . it is general fact !!! in other hand goods are usage rapidly if we calculate these quantity with transportation and opportunity cost it may be the same or more favorable .

ribblefizz

As dxp2718 very succinctly pointed out, there is more to consider than the precise cost of the goods. I routinely, and with full awareness, choose the more expensive (per-item) product when I know it's something that will spoil before I use it all. Furthermore, I am quite willing to pay a few extra pennies today if I know it's something that will keep, and that I'll be needing another of a week down the road. Every trip I avoid making (by buying in bulk, even if that's a few cents more) is one less time-consuming errand I'll have to run, one less worry about running out at an inconvenient time, AND one less opportunity for the store to catch me up with impulse buys. Is that worth a few cents? To me, definitely.

Mohammed Goldstein

A magazine that has little relevant information will continue to loose readership.

Mohammed Goldstein

They couldn't  take advantage of you if you were smart enough to learn math in the first place.

joInAmerica

Isn't this wonderful? More evidence to support the (self-appointed)  media elitists' notion that they are  better than you and me. And therefore, justified to continue their reliable bias. I am embarrassed to see the once mighty Time (I used to read it every week, I really did) sitting at the checkout stand, so thin, that it is technically defunct.

A study was done that shows that many Americans lack basic math concepts or abilities in everyday life. I don't understand how that implies that the "media elitists" are better than you and me. Or did I miss the part that said "except for people who work in media companies. They managed to score perfectly on every answer."

Now if you just change a few words you can get this:Isn't this wonderful? More evidence to support the (self-appointed) University of Minnesota’s Carlson School of Management's

notion that they are  better than you and me. And therefore, justified to continue their statistically reliable bias. I am embarrassed to see the once mighty Time (I used to read it every week, I really did) sitting at the checkout stand, so thin, that it is figuratively defunct.

BanjoBuxby

another one is:

regular price \$xdiscount with savers card 2 for \$y.what they really mean is.. discount with savers card \$y/2  (since they're priced individually when you checkout) but you've ended up spending \$y which is greater than \$x.. and presumably the cost of the underlying good is negligible anyways (tends to be for perishable foodstuffs etc).

Erick-99

This is a horribly written article.  The math is not remotely clear cut as this self proclaimed expert proclaims.  It depends on what you're buying and when, Duh.  Everything is not a commodity.  Liberal elitists get orgasmic  pleasure out of declaring that us "little people" are stupid.  Really this is embarrassing.

phillip heizman

and you're one of the sheeple they need to keep pulling the wool over peoples eyes. baaaad eric!

your math skills stink, what you are buying has no bearing whasoever on the facts and when has even less bearing. and if you even understood the word commodity you would make that ridiculous statement either.

but b/c you're deficient, you then blame the "liberal elitists" when in fact its 100% your problem for being mentally unable to grasp a simple concept. please do the world a favor and dont reproduce.

Robert Baker

While I studied math through differential equations, I must admit I never needed any more than Algebra I to solve the math problems I encountered in my career in IT and Marketing. Still, most people can get by with just knowing how to use the "What If" capabilities of Excel.

its_Joby

OK, but rarely are customers presented a choice between equivalent products at either "33% more" or "33% lower price"

Usually the choice is discount or no discount

Erick-99

That's exactly right. This is just liberal snobbery that people are stupid sheep.

nvrtalk

It is not just that we are "bad at math" that we make the wrong decision. It is because marketeers spend millions developing pricing systems and ad campaigns to present the "wrong decision" in order to take advantage of our predispositions.

Deliberately taking advantage of a weakness in math is stealing. "Yes" I mean this to apply to gambling too.

Preying on consumers is  the tact.

sep332

That didn't happen in the experiment. They were just analyzing coffee beans in a classroom.

redhawk123

Sam's Club and Costco, larger packages do not mean cheaper prices. Yet the stores are packed with people thinking that they are getting a great deal.

sep332

Have you ever been to a Sam's Club? Try actual comparison shopping and you'll see they're often cheaper.

mephi5to

Costco beats base prices but Sale prices somewhere else is always better. Like soap or Bounty paper is always cheaper in ANY pharmacy on sale.

truenorthfree2

Your reply only reinforces redhawks statement that they do not always mean cheaper prices, often cheaper does not mean always.

I am a per unit shopper and know of many items at Costco that are cheaper elsewhere.

Tom Zentra

I have always hated the stupid "Buy One, Get One Free" advertising.

Just lower the price! We don't want gimmicks!!!

mephi5to

buy 1 get 1 free is like the best deal actually, because technically it's 50% off. if your 10 oz of coffee costs 10\$ then buy 1 get 1 free would be 10/20 = 50 c per Oz. And 50% off is the same 5 /10 = 50 cents. you just pay less and get less volume. b1g1 free is a good strategy to move stuff that is overstocked or ready to expire soon

Justin

My ńeighboŕ's mŏther-iń-ląw Maḱes \$8O houŕly on the laptoṗ. She has bėėn out of w0rḱ for 7 months but last Ṁonth her ińcome wąs \$8734 just worḱińg on thė laṖt0Ṗ for a ƒew hours. Gŏ to this web siṫe and ŕead morė.. CashLazy.com

hem_sphere

As a former Ad executive, i feel bad.Only if these folks used their talents in constructive sectors our world would be a cute little place.But na na, by default, we are set for the path of ruindom.

LuluB

Was the size vs. appearance of more value, the only control or differing factor? What if the smaller portion was in a more resource and energy intensive container, while the larger size was in a completely compostable bag -- like as a re-filler size?

If the packaging was exactly the same, this wouldn't matter, as the larger size would still require the difference in more packaging. But if the larger size was in a significantly more "eco-friendly" bag, that could be more attractive to a consumer.

dxp2718

33% more could be a better deal if you factor in the amount your family actually needs, the shelf life of the product, and the cost of going to the store. If buying two at 33% off results in 50% waste (because the food goes bad before it's all consumed), and buying one at 33% off results in an extra trip to the store, and those are expensive enough, then 33% more could actually be the better option.

sep332

That didn't happen in the experiment. They were just analyzing coffee beans in a classroom.

Guest

our society wants more and is willing to do less in return. no surprise really in this entitlement culture created by liberals.

ugotrpk3113

I mean this in the nicest way possible. I cannot wait for this older generation, which has this crazy one side or another mentality, to move on.

We so desperately need a political cleansing. No parties and individuals taking responsibility. Lets go!

Ugo - you too shall be old and unneeded someday. Warning: it happens sooner than you think. As for this "older generation" - exactly whom are you referring to? The over-30s, over 40s, over 50s....? As for individuals taking responsibility - seems you need to do a bit more worrying about yourself and not others.

Guest

I mean this in a nice way too....you live in a fantasy land.

________________________________

To: xfiler93@yahoo.com

Sent: Wednesday, July 4, 2012 10:43 AM

Subject: [itsyourmoney] Re: Consumers Prefer to Get More Rather than Pay Less – Because They're Bad at Math

ugotrpk3113 wrote, in response to xfiler93:

I mean this in the nicest way possible. I cannot wait for this older generation, which has this crazy one side or another mentality, to move on.

We so desperately need a political cleansing. No parties, individuals taking responsibility, and stubborn old people moving on. Link to comment</notifications@disqus.net>

fuckingfantastic

If only we could all be conservatives, hiding in our basements clinging to our guns and bible. Oh how the world would be perfect then.

Joe Parisi

Oh, god. Does EVERYTHING have to be about politics?

Based on your comment, I'm guessing that not getting the point of articles and failing to use proper grammar is the purview of the Conservatives?

Guest

Grammar huh? is that all you have smartass? I find it interesting how you smug assholes always use "grammar" in your responses.Must be the purview of of the LIBTURDS.

________________________________

To: xfiler93@yahoo.com

Sent: Wednesday, July 4, 2012 6:41 AM

Subject: [itsyourmoney] Re: Consumers Prefer to Get More Rather than Pay Less – Because They're Bad at Math

Joe Parisi wrote, in response to xfiler93:

Oh, god. Does EVERYTHING have to be about politics?

Based on your comment, I'm guessing that not getting the point of articles and failing to use proper grammar is the purview of the Conservatives? Link to comment</notifications@disqus.net>

Erick-99

What in God's name are you talking about?  This was an  arrogant ignorant liberal rant.  In other words, "Business As Usual".

ugotrpk3113

Ugh. Not only can you not comprehend a 40 word comment, but you're annoying. Just go away.

hdsgn00

Nothing is free. The (cost) is packaged, and sometimes hidden, in 1) the price (economic), 2) social, 3) opportunity, etc.

Reno Noone

Not math.   Arithmatic.

dxp2718

And not spelling either, it seems.

chkane

The real problem of Math in America is not the Math brain but the confidence about the math. Because the 3rd or 4th grade elementary school students did not memorize the Times Table, they can not solve very simple division and fraction problems thereafter. It continues till 6th, 7th grade...and they self hypnotize that they are not good at math. These students give up for the real math that has not much things with calculation. Let them memorize the Times Table and drill them for simple calculation.

sgtbilko

Okay!  Okay!  I'll get off your lawn, mister!  Just don't give me that speech about memorizing the multiplication tables!

Mohammed Goldstein

Making sure students learn the basics in the early grades may hurt their self esteem.  Can't have that.

Belay Mylast

As a retired high school math teacher, I've forgotten how many times a parent would look me straight in the eye and basically claim some sort of genetic family trait resulting in a math deficiency.  'Never heard of an English teacher being told by a parent:  "I just never was very good at words".

GuillaumeCR

Thought your comment was funny until I read the one below. Apparently dyscalculia is a thing. We both stand corrected.

NicHautamaki

As an English teacher, let me tell you I've heard that plenty of times, sadly.

Justin

my buddy's mother-in-law makes \$84 an hour on the computer. She has been unemployed for seven months and last paycheck ẁas \$8734 just worḱing on the (laṖt0Ṗ) for a few hòùrs , Go to this web siṫe and reaḐ Ṁore CashLazy.com

Richard Kline

Actually that happens more than admitting that they are bad at math

GizmoDuck

I've known several people who excelled in math but couldn't write a grammatically correct sentence to save their lives.