Surprise, surprise: The dual impact of double discounting on consumer preferences

Retailers use price discounts to stimulate sales and impact long-term profitability. While most offer a single discount, retailers occasionally use double discounting, whereby they stack a second discount on top of an already discounted item (e.g., 20 % off plus an additional 25 % off). While double discounting is relatively rare, we demonstrate when and why it is effective. Double discounting is shown to outperform single discounts even when the double discount offered is objectively smaller, and even for low discount percentages. It also outperforms single discounts for consumers who are better able to perceive emotions. Moreover, it results in spillover effects on other non-promoted products. While previous research has indicated that consumers take a cognitive computational approach when offered double discounts by either computing the number of gains, adding the percentage of the two discounts, or assessing the relative magnitude of the two discounts offered, we develop an expanded conceptual model which considers the role that consumer emotional responses play. We find that consumers who make the computational error of adding the two percentages and those who do not both prefer double discounts. Consumers experience feelings of surprise associated with double discounting and this emotional response impacts evaluations beyond computational errors made by consumers, need for cognition, and luck. Thus, we offer a dual process explanation of affect and cognition to explain when and why double discounting is effective. In addition to these theoretical contributions, we also highlight practical managerial recommendations for the implementation of double discounts.