The Multitier Discount Effect

Abstract

How can brands make their quantity discounts more attractive to consumers? This research proposes that, instead of providing only a quantity discount (e.g., regular price: $6.99 each; buy two: $5.59 each), offering it along with an additional tier of discount (e.g., buy one: $6.79 each) can increase the likelihood that consumers take the quantity discount. This “multitier discount effect” occurs because the inclusion of the additional discount tier can lead consumers to perceive the quantity discount price as lower. Through a series of studies involving different consumption contexts, product categories, price points, and discount levels, this research demonstrates the multitier discount effect, its mechanism, and key boundary conditions. Specifically, Study 1 shows that social media ads featuring multitier (vs. control) discounts can attract higher click-through rates. In a preregistered incentive-compatible setup, Study 2 demonstrates the multitier discount effect and the mediating role of perceived price difference. Studies 3–5 indicate that the price level of the additional discount tier, consumers’ prior purchase frequency, and their distrust of the advertised original price can each moderate the multitier discount effect. These findings add to the theoretical literature and provide actionable managerial insights.