One of the things behavioral psychologists know is that how things are presented to people makes a huge difference to the way they perceive them. If you’re ever seen the optical illusion in which two lines of the same length appear to be of different lengths, you’ll know that presentation accounts for nine-tenths of our perception. (This illusion actually has a name – the Muller-Lyer illusion.)

So how you present your discount affects how successful it will be. For instance, if you just cut your price but you don’t also display the pre-discount price, customers may see the price is less than they expected, but they won’t see that it’s a promotional offer. This means their feeling of getting ‘something extra’ will not be so pronounced. They will also expect that price to be the ‘normal’ price, so when your discount is no longer available, they will be discouraged by seeing what they think is a price increase.

That’s why at Vipon we always show the original price crossed out before we show the discounted price. Even if the customer doesn’t do the math, when they see $22.99 crossed out and $7.13 as the new price, they know they’re getting a bargain!

There is a interesting example in the auto sector. Marketing consultants Simon Kucher & Partners carried out a survey in which the same car was offered at the same price, but telling some consumers it was the standard price, and others that it was list price less a 12% percent discount. When the consumers were asked “Would you consider buying this car?” only 21% of the ‘list price’ group said ‘yes’. But 58 percent of those who thought the car was discounted would consider a purchase.

So a discount does actually appear to have a value. It’s as if you are giving a free gift along with the purchase.

There’s also a sense in which the list price is what consumers look at to assess the quality of the product. You read about “a $300,000 house” or “a $62,000 car” or The Six Million Dollar Man and you know how you’re meant to value the product. So in that experiment, customers who saw the discount felt they were buying nearly $30,000 worth of car for $25,000, rather than buying a car that was only worth $25,000.

But you should also look at what kind of discounts your competitors are offering. Each type of product tends to have a median level of discount, or a ‘sweet spot’. For instance, if you offer a discount below $500 on a new car, it’s going to have very little effect. But if you offer $1,000 to $2,000, customers will pay attention. If you offer more, you probably won’t get much extra impact on sales.

If you’re keeping tabs on your competitors, you may see some of them reducing their prices. Rather than match their price cuts, you might consider offering a discount that will bring your product’s effective price just below theirs, while keeping your list price at the same level. That sends a message that your product is higher quality but just happens, right now, to be available for less than it’s worth.

The other big feature of how you communicate your discounts is how you present them as being exclusive, or time-limited. Whether you have discounts only for members of your mailing list, or only on 500 units, or only for a week, the more you limit your discount availability, the more effective it will be as a motivator for purchasers.