The effect of discount frequency and depth on consumer price judgments

The intensity of price discounting by retailers and manufacturers raises important questions about consumer price judgments. In the extreme, discounting can take the form of frequent but shallow discounts or deep but infrequent discounts. The research reported here explores the effects of these strategies on consumer estimation of price levels for competing stores and brands. In an initial experiment in which subjects made brand choices over time, a depth effect was observed that contrasted with the frequency effect found in previous research. Subsequent experiments identified the conditions under which depth (vs. frequency) characteristics of price data dominate consumers' price-estimation judgments. Frequency information is more influential when sets of interstore or interbrand comparative prices exhibit complex and overlapping distributions (hence creating processing difficulty); in contrast, a depth bias occurs when prices have a simpler, dichotomous distribution. These results place pragmatically meaningful limitations on the influence of frequency information and illustrate the importance of context in determining consumer price judgments in a promotional environment.