How to Thwart Discounting of Discounts

Time: October 14th (Monday) 11:00 -12:30

Location: The Second Floor of Wanzhong Building, National School of Development, Peking U.

Speaker: Haiyang Yang, Johns Hopkins University

Abstract

Quantity discounts are widely prevalent in the marketplace, but consumers often “discount” such discounts. For example, consumers may perceive the deal, “original price: $4 each; now: buy two, $3 each,” as offering a lower actual saving than claimed, which degrades purchase likelihoods. Despite the economic significance of this phenomenon, the current understanding of how firms can overcome it is limited. This research seeks to help fill the gap in the marketing literature, identifying means to reduce consumers’ discounting of discounts in the context of quantity promotions. Seven studies involving different product categories, required purchase quantities, price points and discount levels, showed that providing (vs. not providing) single-unit discounts along with quantity discounts could reduce consumers’ discounting of the quantity discounts—they perceived larger saving magnitudes and were hence more likely to purchase the quantity discount offers. Importantly, when the single-unit discount prices were distant from (close to) the quantity discount prices, perceived saving magnitudes became larger (smaller), which in turn boosted (degraded) purchase likelihoods of the quantity discount offers. Furthermore, when other information diagnostic of saving magnitudes of the quantity discounts was more (vs. less) accessible, consumers became less influenced by the inclusion of the single-unit discounts, attenuating the effect. Overall, these findings support the proposed mechanism, and cannot be easily explicated by potential alternative accounts.

Bio:

Haiyang Yang is a faculty member at the Johns Hopkins University. He holds a PhD from INSEAD. His work has appeared in premier marketing and psychology journals (e.g., Journal of Marketing Research, Journal of Consumer Research, Journal of Consumer Psychology, Psychological Science) and has been featured in leading media outlets (e.g., Harvard Business Review, Financial Times). He has served on the Editorial Review Board of Journal of Consumer Research, and received many awards such as the Best Competitive Paper Award from Association for Consumer Research, ACR-Sheth Foundation Dissertation Award, Prix du Meilleur Cas Pédagogique en Marketing from Association Française du Marketing, Overall Winner Award from the Case Centre, Faculty Excellence Award as well as Excellence in Teaching Award from Johns Hopkins. The pedagogical materials he developed have been translated into multiple languages and taught in graduate education curricula at leading business schools globally.