Marketing and the Art of Suggestion

Why 5 for $5 or 10 for $10 Pricing Promotions Work
Pricing promotions for buying more items aren't new, but consumers probably will see more retailers using them - and dangling deals on higher multiples than they used to - in an effort to coax more spending amid higher prices and sluggish sales.

What may have started in the produce aisles, with grocers hawking better prices for those who bought more ears of corn, for instance, remains a popular strategy simply because it works, said pricing expert Stephen Hoch, marketing professor at The Wharton School at the University of Pennsylvania.

In one experiment, a grocer offered canned goods in three different ways: "79 cents, no limit," "79 cents, limit 4," or "79 cents, limit 12."

When there was no limit, Hoch said, people bought three cans. When the limit was four, people bought an average of 3.6 cans, "and when we said 'Limit 12,' they bought seven."

"The bigger the number, the more people buy," he said.

"It's pretty clear that either people just kind of take the suggestion without thinking about it, or that people are under the impression that you have to buy X amount to get the deal."

In another case study, take a look at two stores advertising specials on cream cheese. At store A, the promotion was for 10 packages for $10. At store B, the promotional product was advertised for $1.29 a package. The fine print says you don't have to buy 10 packages to get the special price. Given those choices, you should shop at Store A to check off your shopping list, right?

Maybe not.

According to John T. Gourville, a professor of marketing at Harvard Business School, you're more likely to buy 10 packages at Store A whether you needed 10 packages or two, whereas at Store B, you would buy only the number of packages you really need.

"Many people buy the amount, or buy in increments, that are advertised - with five for $5, they end up buying five boxes," he told The New York Times. Even if you don't need - and won't use - the cream cheese before its expiration date, you might buy those five or ten packages based on the power of suggestion alone.

In negotiations class in business school, you learn how powerful suggestion can be when it comes to numbers and the subconscious recognition of value, so much so that the person who throws out the first number is seen to be at a disadvantage.

Advertising group pricing works the same way by setting a subconscious quantity benchmark. Five loaves of bread for $10? "I'll just get three," the shopper thinks, when in fact they only meant to buy one or two loaves.

It's all about the persuasive art of suggestion.

Sources:
1. Janet Cho, "Why Grocers like 10 for $10 and Other Multiple Promotions," The Plain Dealer, July 24, 2011
2. Sarah Gilbert, "Why 10 for $10 at the Grocery Store Might Bust Your Budget," Walletpop.com, July 22, 2011
3. Stephanie Clifford, "Making 5 for $5 a Bigger Draw Than One for $1," The New York Times, July 18, 2011