When 15% Off Plus 10% Off is More Than 30% Off: Multiple-Discount Promotions are Preferred to Larger Single-Discount Promotions

In a recent article by Chen and Rao (2007), the authors demonstrated that consumers appear to prefer multiple-discount (MD) promotions over single-discount (SD) promotions. For example, consumers prefer 20% off plus an additional 25% off of a $100 item over an economically equivalent 40% off. The authors reasoned that consumers’ preference for MD is due to consumers erroneous processing of multiple percentage changes. Specifically, when presented MD, consumers fall victim to a face value effect (i.e., inferring that 20% off plus an additional 25% off is equal to 45% off; see also Chen et al. 2012, Peters et al. 2012). In the current article I extend Chen and Rao’s (2007) findings by proposing a separate, arguably more fundamental, mechanisms for the influence of MD on price perceptions – perceived rarity of the discount. In a simple pretest, I assessed the frequency of multiple (2 or more), single (1), or no discount (0) promotions from 358 products selected at random from major retailers. Results indicated that there were significantly fewer MD promotions (6.44%) than no-discount (52.66%) and SD promotions (40.90), χ2 (2) = 123.70, p .0001. Therefore, it appears that within this cross-sectional investigation, MD promotions were objectively rarer than SD or no discount promotions.