Understanding The Math Helps Customers Win
Whether it’s bank interest rates, credit card rewards programs, sales tax or retail discounts, consumers are bombarded with numbers and math every day.
Math, like politics, always seems to divide people (pun intended). Ask someone if they like math, and it’s usually either a confident yes or a strong no. In many consumer focus groups, the line “I hate math” is commonplace.
Now it seems that a number of consumer-facing businesses hate math, too. This isn’t entirely new; for decades, cash registers have calculated change so the cashier need not tax his or her brain with math. And many industries – such as automobiles with 0% interest financing and credit cards with flat 1% or 2% rewards – have designed programs that are intentionally easier to calculate for consumers.
But increasingly, there are product offerings and pricing structures that are mathematically unsound. What’s worse: They are posted publicly for everyone to see.
When a company posts a sign that has a math error, it runs the risk of people photographing it and sharing it on social media or, say, in a Forbes article. While a majority of customers may completely miss the error, it’s not worth the public relations risk.
Here are three examples of fairly simple math errors at local businesses:
The Jumbo Bucket
A local driving range offers buckets of golf balls to practice your swing. But if you’re not practiced in math, you might miss the arbitrage opportunity presented by this sign. Upon first glance it looks legitimate; there are increasing bucket sizes (Small, Medium, Large and Jumbo) and correspondingly increasing prices ($5, $9, $20, $25).
A traditional economics model (or even a mathematics textbook) would calculate the price per ball in order to choose the best one. And a marketer would tell you that the answer should be the Jumbo size because while it should provide the best “deal” to the customer, it also gets them to spend the most money (see your local movie theater popcorn pricing as an example).
Behavioral economics, on the other hand, suggests that consumers don’t often have the cognitive wherewithal to perform that calculation, instead relying on what’s easiest or what feels the best. In this case, someone not willing to do the math would assume that the Jumbo bucket is the best deal. But they’d be wrong, because the golf course didn’t get the math right. To wit:
· Small: 40 balls for $5 = 12.5 cents per ball
· Medium: 55 balls for $9 = 16.4 cents per ball
· Large: 125 balls for $20 = 16.0 cents per ball
· Jumbo: 150 balls for $25 = 16.7 cents per ball
The Jumbo bucket of golf balls is actually the most expensive! But what do you think the person behind the counter would say if a customer came in and asked for five Small buckets of balls? It’s almost a guarantee that he or she would try to convince the customer that the Jumbo bucket is a better “deal” because they don’t understand the math. But five Small buckets costs the same $25 as the Jumbo bucket, and gets you 200 balls instead of 150.
The Value Play
At a local amusement park that is part of a bigger chain, my teenage son noticed this sign at one of the carnival games. One play is $2; three plays are $5 – that part makes sense. But then comes the “Value Play” which is five plays for $10. For those who hate math, that’s $2 apiece – not much of a “value” given that a single play is already $2!
The three plays for $5 works out to $1.67 per play, so the right economic decision is to only buy that one. But one has to wonder if anyone actually asks for multiple three-plays and whether the carnie then attempts to upsell them on the “Value Play” instead. Of course, that “Value Play” is five plays, whereas two three-plays is six plays for the same $10.
Luckily, my teenage son doesn’t hate math – yet.
When 16 Ounces Doesn’t Equal A Pound
Chicago knows its popcorn, and a particular mix – cheddar and caramel popcorn combined into one scrumptious bag – is very popular. But one brand didn’t quite understand the math when calculating the prices of its bags, similar to the golf course.
Again, as the bag sizes go up, so do the prices. But some quick number-crunching reveals that the “1 lb” bag is overpriced. Why? Because a pound equals 16 ounces, and it just so happens that the other two sizes are 6 ounces and 10 ounces. When you add up the price of the two smaller bags, it’s $12.00 for a total of 16 ounces, or more than 11% less expensive than the one-pound bag – for the exact same amount of popcorn.
Are these prices intentionally whacky? It would certainly be sinister if so, but it’s more likely that the store owners simply hate math, too. Yet all three examples project a negative image of the brand; they are either intentionally confusing customers (exactly opposite of the customer experience maxim of “Do Simple Better”) or they are too lazy to take out a calculator and do the math correctly.
In either case, the company becomes one that customers cannot trust, and the empowered consumers of today will simply take their business elsewhere.
8/3/19 Update: The local golf course has adjusted its pricing, but it’s still not correct. The Jumbo bucket is still not a “deal” because it is the same per-ball price as the Small, and the customer is still better off getting four Smalls vs. an Extra Large.