Multiple Unit Offers and Rate Calculations: How Rates Influence Price and Promotion Sensitivity

Abstract

Consumers are often faced with multiple unit offers (e.g., $40 for 5 lb of coffee) in the marketplace and must figure out how to evaluate them. Although the total price (e.g., $40) is always provided, the associated rate information is not (e.g., $8/lb of coffee). The focus of this research is on understanding the role that these rates play in influencing consumer decision-making. The authors find that regardless of whether rates are provided by managers or calculated by consumers, consumers are more sensitive to promotional offers with dollar per unit (vs. unit per dollar) rates, because dollar per unit rates increase price salience. Additionally, the authors document how, when rate information is not provided, these rates are computed by consumers. The authors find that consumers prefer to use the larger numerosity element as their rate's numerator, which leads to calculating units per dollar rates when the multiple unit offer's quantity is larger in numerosity than the price, but dollars per unit rates when price is larger in numerosity than the quantity. The authors discuss theoretical, practical, and policy implications.