Do the Math Before You Purchase

July 16, 2012

Time’s Moneyland cautions us to pay more attention when shopping in “Consumers Prefer to Get More Rather than Pay Less—Because They’re Bad at Math.” Though the article focuses on retail shoppers, the lesson can certainly be applied to search and content processing “offers.”

Writer Brad Tuttle reports on a recent study from the Journal of Marketing which found that, given a choice between getting a 33% discount and getting 33% more product free, the vast majority of shoppers perceived the options as equal. They are not, as a few simple calculations reveal. The article explains:

“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.”

The joy of getting something extra for free probably has a lot to do with this consumer blind spot. The mistake of paying little or no attention to unit price even has a name: base-value neglect. So be mindful, and do the math.

We wonder, though. With open source search providing “free” or “low cost” options, will discounts on search or content processing software prove to be an exception to this rule? Hmm. You’d have to run some calculations to be sure. How much does that free search system cost?

Cynthia Murrell, July 16, 2012

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