The Illusion of Double-Discount: Using Reference Points in Promotion Framing

Abstract

Double-discount is an effective format for promoting purchase decisions. However, extant literature has overlooked how temporal order of discounts applied affects consumers’ purchase decisions. In this paper, we show that the sequence of discount magnitude (e.g., 10% followed by 40% vs. 40% followed by 10%) leads to biases in consumer judgment and influences the perceived appeal and purchase intention of the deal. We term this thedouble-discount sequence effect. Using four experiments, we showed that double-discount in an ascending sequence (e.g., taking 10% off,thenan additional 40% off) is preferable over that in a descending sequence. We also found that discount application sequence—but not the presentation order—matters to consumers. Consumers anchor on the first discount they encounter and evaluate the second discount with respect to this first one.