When more is Less: The Impact of Base Value Neglect on Consumer Preferences for Bonus Packs over Price Discounts

Abstract

The interpretation of a percentage change often hinges on the base value to which it is attached. The authors identify a tendency among consumers to neglect base values when processing percentage change information and investigate the implications of such base value neglect for how consumers evaluate economically equivalent offers presented in percentage terms, such as bonus packs and price discounts. The authors first document a substantial advantage in sales volume for a bonus pack over an economically equivalent price discount in a field experiment conducted in a retail store. Furthermore, in a mall-intercept survey and multiple lab studies, the authors provide additional evidence in support of the effect and identify managerially useful boundary conditions for when the effect is likely to manifest. The article concludes with a discussion of the theoretical and managerial implications of the findings.