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The Psychology of Discounts: Why 50% Off Hits Different Than BOGO

The math behind retail pricing tricks. Learn why stores use specific discount formats and how to calculate which deal actually saves you more money.

LifeByNumbers TeamPublished on January 25, 20264 min min read

You're standing in Target. One sign says "50% OFF!" Another says "Buy One Get One Free!" Your brain tells you they're the same deal.

They're not. And retailers know it.

The BOGO Illusion

Here's the thing about "Buy One Get One Free" - you have to buy TWO items to get the discount. Let's do the math:

50% Off One Item:

  • Original price: $20
  • You pay: $10
  • Items you get: 1
  • Cost per item: $10

Buy One Get One Free:

  • Original price: $20 each
  • You pay: $20
  • Items you get: 2
  • Cost per item: $10

Same cost per item, right? So what's the difference?

You spent $20 instead of $10.

BOGO forces you to buy more. That's why stores love it. A 50% off sale might get you to spend $10. BOGO gets you to spend $20 - even though you "saved" the same percentage.

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The "Percent Off vs. Dollars Off" Mind Game

Which sounds better?

  • "Save 25%"
  • "Save $5"

Depends on the price. Retailers know the "Rule of 100":

Under $100: Percentages sound bigger

  • "$20 item, save 25%" sounds better than "$20 item, save $5" (same thing)

Over $100: Dollar amounts sound bigger

  • "$400 TV, save $100" sounds better than "$400 TV, save 25%" (same thing)

This is why you see percentage discounts on clothes and dollar discounts on electronics.

The Anchoring Trick

Ever notice those "Compare at $150, Our Price $59" tags?

The $150 is called an "anchor." It's often a fictional price nobody ever paid. But it makes $59 feel like a steal.

Calculate the supposed discount:

  • "Original" price: $150
  • Sale price: $59
  • Apparent savings: 61%

That 61% feels incredible. But if the item was always worth $59, you saved nothing.

Stacking Discounts: The Math Gets Weird

"Take an extra 20% off already reduced prices!"

If something is already 40% off, and you take an extra 20% off, what's your total discount?

It's NOT 60%. Here's why:

  • Original price: $100
  • First discount (40%): $100 - $40 = $60
  • Second discount (20% of $60): $60 - $12 = $48
  • Actual total discount: 52%

Stacked percentages always give you less than you'd expect.

The "Per Unit" Reality Check

Three boxes of cereal for $12 sounds like a deal. But is it?

  • 3 for $12 = $4 per box
  • Single box price: $4.29

You're saving $0.29 per box. But you're also buying three boxes of cereal you might not need.

Always calculate:

  1. Price per unit
  2. How much you'll actually use
  3. Whether the "bulk savings" is worth the extra spending

When 0% Is Actually 100%

"0% financing for 24 months!"

Sounds free. But:

  • If you miss a payment, many 0% deals convert to 26%+ interest - retroactively
  • The price might be inflated to compensate for the 0% offer
  • You're still spending money you don't have

Calculate what 26% interest on a $1,000 purchase looks like over 24 months if you miss one payment. That "0% deal" suddenly costs you $260.

The Smart Shopper's Percentage Checklist

Before any "deal" convinces you to buy:

1. Calculate the actual dollar savings

  • 15% off a $12 item = $1.80 saved
  • Worth the trip to the store?

2. Calculate cost per unit

  • Is the "family size" actually cheaper per ounce?

3. Calculate what you'd spend without the sale

  • Were you going to buy this anyway?
  • A 50% discount on something you don't need costs you 50% of the price

4. Calculate the "time value"

  • Driving 20 minutes to save $3 means you value your time at $9/hour

The Uncomfortable Truth

The best discount is 100% - not buying something you don't need.

Every percentage off is still a percentage of money leaving your wallet. A $100 item at 70% off still costs you $30.

Use the percentage calculator above to see through the marketing. But remember: the math only helps if you're honest about whether you needed the item in the first place.

Next time you see a "SALE" sign, pull out your phone and do the math. You might be surprised how often the "deal" is designed to make you spend more, not less.