Industry Buzz: The Rule of 100
At one point in time you likely offered a discount on your club’s services, whether it was discounted pricing for a membership, personal training package or smoothie. When you made this offer, did you put much thought into whether you should use a dollar amount ($5 off), or a percentage amount (10% off), in your advertising?
If you just picked hap-hazardously, you may have made a mistake, according to the Rule of 100.
In his book “Contagious: Why Things Catch On,” Jorah Berger explained that people value a deal based on its reference point. For example, $10 off of a $25 clock seems like a great deal to most people. But $10 off a $250 TV? Not so much. Most would say this wasn’t even a deal at all, even though you’re still saving $10.
This is where the Rule of 100 comes into play. Berger explained, “If the product’s price is less than $100, the Rule of 100 says that percentage discounts will seem larger. For a $30 T-shirt or a $15 entree, even a $3 discount is still a relatively small number. But percentage wise (10 percent or 20 percent), that same discount looks much bigger.”
Berger continued, “If the product’s price is more than $100, the opposite is true. Numerical discounts will seem larger. Take a $750 vacation package or a $2,000 laptop. While a 10 percent discount may seem like a relatively small number, it immediately seems much bigger when translated into dollars ($75 or $200).”
So the next time you put a product or service on sale, keep the Rule of 100 in mind when framing the discount. If your regular $30 membership prices are $3 off, state they’re 10 percent off instead. If your personal training packages are 30 percent off, state they’re $100 off instead.
By keeping this simple rule in mind, you may see the demand for the products on sale skyrocket.