If you think that getting an extra half-size lotion for free is better than getting lotion that is 35 percent cheaper, you're wrong. Those two discounts are roughly equivalent. But a new study found that consumers prefer the first discount.
Because many consumers seem to be lousy at comparing percentage changes, they prefer to get an extra product for free than to buy a product at a cheaper price.
That's according to a study by Akshay Rao, a marketing professor at the University of Minnesota; Haipeng "Allan" Chen, a marketing professor at Texas A&M University; and Howard Marmorstein and Michael Tsiros, marketing professors at the University of Miami. (Hat tip: the Economist.)