Contagious Why Things Catch On



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contagious why things catch on jonah be

The Rule of 100
Another framing factor that impacts practical value is how promotional offers are expressed. Some
offers are expressed in dollars off, or absolute discounts ($5 or $50 off). Other offers are expressed
in percentage off, or relative discounts (5 percent or 50 percent off). Could whether a promotion is
framed as money or as a percentage off affect how big the discount seems?
Take twenty percent off a $25 shirt. The same reduction can be represented as 20 percent off or $5
off. Which seems like a better deal?
Or think about a $2,000 laptop. The same reduction on a $2,000 laptop can be represented as 10
percent off or $200 off. Does one method of framing the discount make the deal seem better than the
other?
Researchers find that whether a discount seems larger as money or percentage off depends on the
original price. For low-priced products, like books or groceries, price reductions seem more
significant when they are framed in percentage terms. Twenty percent off that $25 shirt seems like a
better deal than $5 off. For high-priced products, however, the opposite is true. For things like
laptops or other big-ticket items, framing price reductions in dollar terms (rather than percentage
terms) makes them seem like a better offer. The laptop seems like a better deal when it is $200 off
rather than 10 percent off.
A simple way to figure out which discount frame seems larger is by using something called the
Rule of 100.
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 entrée, even a $3 discount is still a relatively small number. But
percentagewise (10 percent or 20 percent), that same discount looks much bigger.
If the product’s price is more than $100, the opposite is true. Numerical discounts will seem
larger. Take a $750 vacation package or the $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 when deciding how good a promotional offer really is, or how to frame a promotional offer to


make it better, use the Rule of 100. Think about where the price falls relative to $100 and how that
shifts whether absolute or relative discounts seem more attractive.
—————
One last point about promotional offers is that the practical value is more effective the easier it is
for people to see. Take the shopper discount cards that you get at your local grocery store or
pharmacy. These cards are certainly useful. They save consumers money and sometimes even give
them free gifts if they have accumulated enough purchases. But one problem is that the practical value
is not very visible. The only information people get about how much they saved is hidden among a
half dozen other pieces of information on a lengthy receipt. And given that most people don’t show
their receipts to others, it’s unlikely that anyone but the person who used the card will see how much
they saved. That makes it less likely that the information will be contagious.
But what if stores made the practical value easier to see? They could put up a sign at checkout that
shows other people in line how much the person checking out saved. Or the store might ring a bell
every time someone saved more than twenty-five dollars. This would make two things happen. First,
people would get a better sense of how much they could save by getting the card, encouraging anyone
who doesn’t have one yet to get one. Second, it would allow people to see the impressive amounts
that some other shoppers were able to save, encouraging them to transmit these remarkable stories of
practical value. As discussed in the Public chapter, it’s hard to talk about something you can’t see.
MORE THAN MONEY
I am terrible at investing. Too many options, too much daily volatility, and too much risk. I’d rather
keep my money in a cardboard box under my bed than put it in some mutual fund that could lose
money. The first time I bought stocks I barely dipped my toe in. I picked two or three that seemed like
good long-term investments based on being strong brands and tried to leave it at that.
But my curiosity got the best of me. I frantically checked every day how each stock was doing. A
dollar up today? Huge success! Thirty-five cents down the next day? Hopelessly despondent and
considering giving up investing ever again.
Needless to say I needed help. So when it came time to put money in my 401(k) for work, I picked
some safe index funds that track the stock market.
Soon after, Vanguard, the firm that manages my retirement plan, sent me a short e-mail asking if I’d
like to receive its monthly newsletter

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