Discount framing: percent or euro? The Rule of 100 put to the test

Note: This text is not legal advice. Have your specific implementation reviewed by a lawyer.

The same saving, two feelings

A T-shirt costs €20 and is reduced to €15. Which is the stronger statement, “25% off” or “save €5”? For a €2,000 laptop that now costs €1,500: “25%” or “save €500”?

Mathematically it is the same each time. Psychologically, so the common explanation goes, it is not: for the cheap product the percentage looks bigger, for the expensive one the amount. This rule of thumb has a name.

The Rule of 100: origin and claim

The name “Rule of 100” was coined by marketing professor Jonah Berger in his book Contagious (2013) — as a rule of thumb, not as a finding; he does not test it there. His rule: if the price is below 100, percentage discounts look larger. If it is above, absolute discounts look larger. Behind it is the idea that we perceive the bigger number as the bigger saving: 25 versus 5, but 500 versus 25.

The book is not a primary source. The empirical core comes from Chen, Monroe and Lou (1998). They describe their work as the first empirical test of the rule of thumb “dollars for the expensive, percent for the cheap product”, which Heath, Chatterjee and France (1995) had only postulated. The threshold at 100 itself was first tested directly by González et al. (2016). Attributing the rule to Kahneman and Tversky’s (1979) prospect theory is incorrect, because that work does not test discount framing.

What the studies show

The first empirical test dates from 1998. Chen, Monroe and Lou gave 119 students a scenario: a computer at $1,595 or a box of floppy disks at $7.95, each with a 10 percent discount, presented either in dollars or in percent. Participants rated on a scale how large the saving seemed.

So the pattern flips with the price — and in both directions, not just one. That it flips is statistically supported (F = 3.16, r = 0.17).

The r measures the strength of an association on a scale from 0 to 1; values around 0.1 count as small. Every effect in this study lies between 0.16 and 0.21 — real, but small.

For purchase intention the difference did not appear. Part of that is the measure: participants were asked whether they would trade up to a model 25 percent more expensive — a measure where the perceived gain and the larger outlay can cancel each other out. The authors call their 10 percent discount deliberately conservative and report that a pilot with 15 percent showed no effect at all.

This study says nothing about the threshold at 100: its two products sat at $7.95 and $1,595, far out on either side.

A later paper finds the effect in only part of the sample. Choi and Mattila (2014) presented 174 adults from an online panel with a hotel room at $225, discounted by 25 percent or by $56.25.

Both differences in the top row are statistically meaningful. The price was far above the threshold of 100 — the rule predicts the dollar advantage here, and it appeared in only one of the two groups.

Two qualifications belong with this. Sense of power was not induced but measured with a scale and split at the median; only the presentation was randomly assigned. It is therefore an accompanying feature, not an experimentally produced cause. And the study’s mediation finding concerns sense of power, not the presentation: those who felt more powerful were more confident they could do the arithmetic, which fully explained perceived savings and only partly explained booking intention.

González, Esteva, Roggeveen and Grewal (2016) were the first to test the threshold directly, in three experiments:

• Experiment 1 (151 students): for the jacket at 480 pesos, the absolute amount produced more perceived value (4.16 versus 3.70) and higher purchase intention (3.72 versus 3.20), both significant. For the balloons at 48 pesos the pattern reversed but stayed clearly below significance on both measures.
• Experiment 2 (163 people from the general population): tyres at $150 and $350. The absolute amount produced more perceived value (p < 0.01); for purchase intention the difference was only marginal (p = 0.09).
• Experiment 3 (232 students): a jacket at $1,450, discounted by 10 or 30 percent. The absolute amount won on both measures, regardless of discount size.

The most revealing part is a posttest in the discussion: at exactly 100 pesos with a discount of 20 pesos or 20 percent — two numbers of equal size — the difference vanished entirely (2.77 versus 2.75). That supports the authors’ reading: it is not the price that decides but which of the two numbers is larger. The threshold sits where that flips, so in euros at €100.

What this means for the rule. Three claims are bundled inside it, and they are supported very differently.

If you want to maintain a single format, the absolute amount is the more conservative choice: it is supported above the threshold and was never a disadvantage below it. For how cheap products are perceived, however, both studies point to the percentage. That is a trade-off, not a finding.

And it applies only to the effect while the promotion runs. For the period afterwards, an argument runs the other way.

What happens after the promotion

The studies above measure how a discount works while it runs. DelVecchio, Krishnan and Smith (2007) ask a different question: what does the presentation do to the price customers expect afterwards? Four experiments with 196, 239, 123 and 116 students, using simulated supermarket shelves with shampoo and pasta sauce.

The finding runs against intuition. After a deep discount, the expected future price fell much further with a cents-off frame than with a percentage frame.

So discounting in cents does more damage to the price customers expect. With a shallow discount there was no difference. A second study using a different product repeated the pattern (77.3 versus 88.0 percent), though the interplay with discount depth reached only p = .07 there.

The reason is plain arithmetic. A cents amount is subtracted; a percentage has to be multiplied.

The authors identify this shifted price perception as the main route — control for it and the interplay disappears. The lower weight customers place on a percentage price adds to it but does not explain the dependence on discount depth.

That has consequences for what follows. In a third round, with the regular price restored, 44.6 percent chose the brand again after a deep percentage discount, against 25.0 percent after a deep cents-off discount. The individual comparison is meaningful, though the underlying interplay is only marginal (p = .06). The percentage format cost nothing: on choice during the promotion the presentation had no effect (p > .20). The authors’ hypothesis on that point failed.

The qualification is decisive. In a fourth experiment the authors used round numbers: a $3.00 base price and a discount of 10 or 50 percent. That makes the percentage as easy to compute as the amount — and the effect vanished entirely (p = .35). The percentage format therefore does not protect price expectations in itself, only for as long as it costs mental effort.

Two explanations, one open question. The Rule of 100 explains the effect through the size of the number: 25 looks large next to 5 and small next to 500. DelVecchio et al. (2007) and Choi and Mattila (2014) explain it through the arithmetic: a percentage is harder to work out, which lowers confidence and shifts the estimate. The two do not predict the same thing, and in our sources each has exactly one direct test — for the size of the number, González et al.’s (2016) posttest, where the difference vanished once both numbers were equally large; for the arithmetic, DelVecchio et al.’s fourth experiment, where it vanished once the percentage became easy to compute. Which explanation carries is open. For practice that mainly means a rule of thumb alone does not settle the choice.

What the studies do not show

• They mostly measure perceived savings and purchase intention in surveys or scenarios, not actual buying behavior.
• They examine consumer goods and services, hardly any B2B purchases or SaaS.
• For the frequently given explanation “B2B buyers can justify the absolute amount internally more easily”, our sources contain no evidence at all. It remains a hypothesis.
• The Weber–Fechner argument that the brain evaluates discounts relative to the base price is likewise backed by no verified source in this context. It therefore does not stand here.

Practical cases

How to test it

Compare the two presentations in an A/B test with the same price and the same saving. Measure purchase rate and revenue per visitor, not just clicks. If you discount often, measure the period afterwards as well. DelVecchio et al. (2007) show across two studies that the presentation shifts price expectations after the promotion, and in a third that this carries through to repeat choice. A test that looks only at the promotion week misses exactly that part.

Ethics check and legal framework

Limits and criticism