“When More Is Less: The Impact Of Base Value Neglect On Consumer Preferences For Bonus Packs Over Price Discounts,” Carlson School of Management Professor Akshay Rao looks at how consumers view “mark downs” versus “buy one, get one free” types of deals.
The store was able to sell 75 percent more when the product was marked as “50% more free.”
“consumers are inclined to perceive add-ons such as bonus packs as gains but view price discounts as reductions in losses. Consequently, bonus packs are preferred to price discounts because in most instances, a gain in quantity is preferred to a reduction in monetary loss as a result of the shape of prospect theory’s value function.”
“a preference for bonus packs over price discounts for the less expensive bread and bath tissue was reversed for the more expensive detergent and sliced cheese.”