The Powerful Influence of Pennies-a-Day Price Offers
When marketers quote prices in pennies-a-day terms, many consumers get hooked.
Posted April 22, 2019
In an August 1960 newspaper advertisement, German typewriter seller Olympia offered its “world’s finest” precision portable typewriter with the tag-line “IT’S YOURS… for just pennies a day.” More than 50 years later, in a moving 2013 advertisement for UNICEF USA, a montage of distressed and hungry children in pitiable conditions rolled on as film actress Alyssa Milano exhorted the viewer “to reach into your pocket and pull out 50 cents to save that child.” (See the video below).
Sellers and fundraisers have used pennies-a-day price offers for decades. It’s a popular and effective way to quote a price. Magazine publishers first began promoting their subscriptions on a per-issue basis instead of an annual price back in the early 1980s. Consumer psychologist John Gourville explains this decision was fueled by field experiment results conducted by Time Magazine and others. The companies tested response rates for per-issue ($1 per issue) vs. per-year ($52 per year) offers. They consistently found per-issue offers to be 10 percent to 40 percent more effective in enticing new subscribers. Even today, the New Yorker, the Financial Times, and others, routinely solicit new subscribers this way.
There is also considerable academic research evidence that pennies-a-day offers are successful. In his research, Gourville has found it to be effective. In one study, for instance, participants were asked to donate to a worthy cause through payroll deductions. When the request was framed as “an ongoing contribution of 85 cents per day,” 52 percent of those asked agreed to donate. But when it was framed as “a total contribution of $300 per year,” only 30 percent of respondents accepted. Pennies-a-day prices seem lower, and therefore more attractive to buyers.
What exactly is pennies-a-day price framing?
The pennies-a-day offer is what consumer psychologists call “temporal reframing” of the price. A larger total expense that the consumer will incur once is converted into a series of small daily or ongoing expenses solely for the sales pitch. Consumers don’t pay pennies every day using some sort of micro-transaction. When the time comes to buy, they pay the full price or pay each month. The Olympia typewriter, for instance, cost $75 in 1960 (approximately $645 in 2019 dollars). The buyer had to make a down payment of $10-$15 and then pay several dollars per month, eventually owning the typewriter outright.
Why does pennies-a-day framing work?
The goal of the pennies-a-day price offer is to lower the price hurdle, making the shopper think about how much buying the item will cost them in terms of small daily chunks.
That’s why this method works when the buyer is evaluating a single alternative (as opposed to comparing two brands). The buyer decides to either take the seller’s offer or to leave it, not choose between two different offers. Under such circumstances, consumer psychologists have found that consumers evaluate the offer in two steps.
First, they recall comparable expenses to provide some context for the pricing offer’s evaluation. For instance, if you’re told that feeding a malnourished child in Burundi will cost you only about 50 cents per day, you’ll be likely to recall other equivalent expenses which cost you about 50 cents a day such as drinking a cup of coffee at home. In some cases, the marketer may go a step further and make this comparison for you.
Next, consumers assess the pennies-a-day offer relative to these expenses. If the offer seems similar, a psychological process called “assimilation” occurs where the individual deems the two expenditures to be similar and concludes it’s reasonable to compare them. However, if the offer is seen as different, that is, if it doesn’t share common features, a process called “contrast” occurs, and the individual rejects the possibility of comparison. Then, according to researchers:
“…both the PAD and the aggregate transactions may be judged as similar to their respective retrieved comparisons, which results in assimilation and category inclusion in both cases. Therefore, the PAD transaction takes on the characteristics of expenses such as coffee and lottery tickets—expenses typically thought of as trivial, affordable, and out-of-pocket. Similarly, the aggregate transaction takes on the characteristics of expenses such as airline tickets and appliances—expenses typically thought of as significant and somewhat unaffordable and that consumers generally look to avoid or delay. As a result, all else being equal, the PAD transaction should be perceived as a more attractive offering and lead to higher compliance than the financially equivalent aggregate transaction.”
What’s more, such price offers don’t have to be made on a “per day” basis. Any shorter period is better than a longer period. For example, if a price per day offer is not viable, a “price per week” offer will be more effective than a per-month or per-year offer.
Letting consumers make the comparison
Savvy marketers influence consumers by framing the item’s price in pennies-a-day. They provide a comparison expense that the consumer can readily believe is comparable to the price offer to produce favorable evaluations. Sometimes they don't even have to do this.
The food company Kellogg’s ran popular advertisements for Corn Flakes in the 1990s showing the shocked reactions of consumers when they were told that one serving of Corn Flakes with a half cup of milk costs less than 25 cents. One shopper responded, “You can't even buy a postage stamp for 25 cents anymore.” Another said, “Four bowls for a buck." Kellogg’s didn’t provide the comparison expense, consumers conjured it up themselves.
Pennies-a-day is a powerful technique to sell products because few other methods can make any item seem more affordable to potential buyers.