When signal swamps substance: the effects of multi-unit discount’s positive and negative cues on sales
| Date | 20 November 2017 |
| DOI | https://doi.org/10.1108/JPBM-06-2016-1207 |
| Pages | 750-758 |
| Published date | 20 November 2017 |
| Author | Devon DelVecchio,Timothy B. Heath,Max Chauvin |
| Subject Matter | Marketing,Product management,Brand management/equity |
When signal swamps substance: the effects of
multi-unit discount’s positive and negative
cues on sales
Devon DelVecchio
Department of Marketing, Farmer School of Business, Miami University, Oxford, Ohio, USA
Timothy B. Heath
Department of Marketing, University of South Florida, Tampa, Florida, USA, and
Max Chauvin
Université Paris Dauphine, Paris, France
Abstract
Purpose –Multi-unit discounts (MUDs, e.g. “3 for $4”) typically increase sales relative to other discounting frames. This study demo nstrates the
value of MUDs by showing that positive multi-unit price/quantity signals are potent enough to match and even exceed the sales produced by larger
discounts on single items. However, there is reason to believe that MUDs can produce neutral effects in some cases (e.g. among consumers
interested in only single-unit purchases) and even negative effects in others. In addition, the study considers whether MUDs can, in some cases,
reduce purchase quantities by signaling smaller-than-otherwise-planned purchase amounts and/or lower-quality products.
Design/methodology/approach –The effectiveness of MUDs is tested in both the field and lab. Study 1 models purchase quantities stemming
from 2,374 purchases of discounted items at a mass retailer. Purchased products ranged in type from pantry items to apparel and electronics, and
ranged in price from 44¢ to $99.99. There were 1,530 single-unit discounts, 596 two-unit discounts and 248 discounts, involving three or more
units. Study 2 consists of a laboratory experiment that overcomes the shortcomings of Study 1 by accounting for non-purchasers, controlling for
product classes and testing whether smaller MUDs can lead to lower purchase quantities for large r-purchase-quantity products.
Findings –The results of both the field study and the laboratory experiment indicate that MUDs’monetary cue (savings) and purchase-quantity cue
(volume) increase purchase quantities. Generally, purchase quantities increased monotonically with the number of units offered in the discount. In
fact, the quantity cue is so effective that it can increase sales enough as to substitute for larger discounts. However, in some instances, MUDs can
decrease intended purchase quantities. The negative effect of MUDs is the most pronounced for larger unit deals, offering deeper discounts on
perishable goods.
Originality/value –This research is the first to demonstrate that the power of the signals provided by MUDs may be so positive as to lead them to
be more effective than discounts of substantially larger value but also so negative as to render them less effective than single-un its discounts. This
negative outcome poses a threat beyond those typically associated with discounts, in that rather than consumers simply discounting a discount, in
which case the discount remains positive even if their impact at the margin wanes, the MUD frame may actually reduce sales.
Keywords Promotions, Discounts, Price framing
Paper type Research paper
Extensive research has been conducted on pricing strategies
and tactics such as price endings (Coulter and Coulter, 2007;
Ginzberg, 1936;Lambert, 1975;Schindler, 2006;Stiving and
Winer, 1997), multi-dimensional versus integrated discounts
(DelVecchio et al., 2007;Estelami,2003;Morwitz et al., 1998;
Kim and Kramer, 2006a) and price and discount framing
(Choi et al., 2012;Hardesty and Bearden, 2003;Kim and
Kramer, 2006b). A consistent finding across research on
pricing tactics is that economically equivalent, or nearly
equivalent, offers can result in significantly different consumer
responses. For instance,Chen and Rao (2007) report results of
afield study in which a promotion framed as two price
reductions (25 and 20 per cent) resulted in significantlygreater
sales than an economicallyequivalent single price reduction (40
per cent).
One common pricing tactic is to offer quantity discounts.
Sellers, for example, often charge lower per-unit prices if
consumers buy more in a single purchase occasion (non-
cumulative quantity discounts; Gu and Yang, 2010)ormore
across multiple purchases within a stated period (cumulative
quantity discounts such as reward programs; Melnyk and van
Ossalaer, 2012;Weiand Xiao, 2015). Another quantity-related
discount that has become popular is the multi-unit discount
(MUD). MUDs differ from traditional quantity discounts in
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
26/7 (2017) 750–758
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-06-2016-1207]
Received 6 June 2016
Revised 14 October 2016
Accepted 27 November 2016
750
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