When it comes to discounting strategies, brands often face a common dilemma: Should they offer percentage-based discounts or dollar-off discounts?
The simple answer: A/B test it.
Testing both options against each other is the best way to determine which resonates more with your audience, as each brand and product line is unique.
But let’s break it down.
Why Percentage-Based Discounts Often Work
In our experience, percentage-based discounts tend to outperform dollar-off offers about 70% of the time (don’t quote us on this number).
The psychology behind this is simple: percentages can feel more significant, especially on high-value products.
A 20% discount on a $200 product feels more impactful than a $20 discount, even though the amount is identical.
It gives customers the illusion of saving more, especially when dealing with products that are priced in the hundreds or thousands.
This isn’t to say that percentages always win.
The value perception of a percentage-off deal depends on your product’s pricing structure.
For instance, for low-priced items (think: under $50), a percentage discount might seem negligible compared to a straight dollar-off discount.
In those cases, your customer might find a $10 discount more appealing than a 20% reduction.
The Case for Dollar-Based Discounts
Dollar-off discounts can be more tangible, especially for budget-conscious shoppers.
Customers can easily understand that they are getting $20 off, which may feel more immediate than the deduction of a percentage.
For products with a lower price point, offering $5 or $10 off might provide a sense of value that percentages can’t deliver.
This option can be particularly effective in specific scenarios like clearance sales or limited-time offers, where customers are more likely to be motivated by a clear dollar amount rather than calculating percentages in their heads.
A/B Testing: Always Be Testing
No matter which strategy you lean toward, you won’t know which performs better for your brand until you A/B test.
When running an A/B test, it’s crucial to stick to changing one variant at a time.
Some businesses get excited and want to test multiple elements in one go, but that leads to murky results.
Testing only one variable at a time ensures that the data you collect is clean and actionable.
When running these tests, remember that significant data takes time to gather.
A proper A/B test might require a large sample size — sometimes as much as 100,000 data points.
If your brand doesn’t have a huge customer base, you’ll need patience.
In any case, a solid benchmark to shoot for is at least 10,000 occurrences before you draw any conclusions.
Trust the Data
In the end, the best type of discount depends on your customer base and your product’s price point.
Dollar-based discounts may win over those who like tangible savings, while percentage-based deals can work wonders for more expensive products where the savings feel larger.
Either way, the best strategy is to always be testing.
By methodically testing one variable at a time, you’ll learn what resonates with your audience and maximize the effectiveness of your discount strategy.
