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Multi-unit discounts (MUDs, e.g. “3 for $4”) typically increase sales relative to other discounting frames. This study demonstrates the value of MUDs by showing that positive multi-unit price/quantity signals are potent enough to match and even exceed the sales produced by larger discounts on single items. However, there is reason to believe that MUDs can produce neutral effects in some cases (e.g. among consumers interested in only single-unit purchases) and even negative effects in others. In addition, the study considers whether MUDs can, in some cases, reduce purchase quantities by signaling smaller-than-otherwise-planned purchase amounts and/or lower-quality products.

The effectiveness of MUDs is tested in both the field and lab. Study 1 models purchase quantities stemming from 2,374 purchases of discounted items at a mass retailer. Purchased products ranged in type from pantry items to apparel and electronics, and ranged in price from 44¢ to $99.99. There were 1,530 single-unit discounts, 596 two-unit discounts and 248 discounts, involving three or more units. Study 2 consists of a laboratory experiment that overcomes the shortcomings of Study 1 by accounting for non-purchasers, controlling for product classes and testing whether smaller MUDs can lead to lower purchase quantities for larger-purchase-quantity products.

The results of both the field study and the laboratory experiment indicate that MUDs’ monetary cue (savings) and purchase-quantity cue (volume) increase purchase quantities. Generally, purchase quantities increased monotonically with the number of units offered in the discount. In fact, the quantity cue is so effective that it can increase sales enough as to substitute for larger discounts. However, in some instances, MUDs can decrease intended purchase quantities. The negative effect of MUDs is the most pronounced for larger unit deals, offering deeper discounts on perishable goods.

This research is the first to demonstrate that the power of the signals provided by MUDs may be so positive as to lead them to be more effective than discounts of substantially larger value but also so negative as to render them less effective than single-units discounts. This negative outcome poses a threat beyond those typically associated with discounts, in that rather than consumers simply discounting a discount, in which case the discount remains positive even if their impact at the margin wanes, the MUD frame may actually reduce sales.

Brand extensions allow consumers to use past experiences with the brand in order to assess the extension and thereby reduce the risk associated with purchasing a new product. In considering the ability of a brand to mitigate the risk associated with an extension (a construct herein referred to as brand reliability), prior research has focused on the role of fit between the brand and the extension category. In the present study, results indicate that in addition to fit, characteristics of the brand portfolio (number of products affiliated with the brand and the quality variance of these products) play an important role in affecting consumer impressions of brand reliability. In contrast to prior research that forwards that brands become diluted by offering extensions, the present results suggest that having a greater number of products affiliated with the brand has positive consequences when consumers evaluate a new extension.

This research aims to integrate two theories of reference price formation and to test the resulting exemplar‐prototype hybrid (EPH) model's predictions. Study 1 tests the predictions of the EPH model regarding price attractiveness ratings. Study 2 helps to document the process by which the EPH model operates.

The investigation consists of a pair of laboratory experiments that manipulate the skew (positive, negative) of historic price data, and the frequency of the modal price (high, low) in the price history.

Both the skew of prices to which consumers are exposed and the frequency with which the modal price occurs affect recall of the modal price and evaluations of the attractiveness of subsequent prices.

Consumers rely on information about both the price range and individual price points to form reference prices. Common models of reference price effects may be improved by including a non‐linear estimate of the effect of modal price frequency.

Managers are advised to offer a consistent regular price from which occasional discounts of varying value are offered to create a strong memory trace in consumers' minds for the higher “regular” price and avoid such a trace for any one discounted price.

Prior studies detail aspects of the relationship between reference prices and the attractiveness of market prices. This is the first attempt to integrate, rather than contrast, the two predominant types of theories (range‐based, price‐point based) of reference price formation.

The purpose of this paper is to investigate whether the negative effect of lower prices on perceived brand quality that has been demonstrated in evaluation tasks arises in a brand choice context.

The effects of lower prices on perceived quality are assessed via two laboratory experiments in which college students participated.

A lower price is associated with lower perceived brand quality in Study 1's evaluation task environment. However, Study 2's results indicate a reversal of the negative effects of lower prices on perceived brand quality in an evaluation task to generally positive effects when the lower price is offered in the form of a discount in a choice task.

In addition to providing evidence that fears of the detrimental effects of lower prices may be overblown, the results also provide insight to managers of brands of different levels of quality on how to manage discounts to build, or at least to insulate, perceptions of the brand's quality.

The paper's findings may guide both managerial practice and future research on the effects of lower prices, particularly those in the form of a discount.