Can rounding up price discounts reduce sales?

Abstract

Some retailers round up price discounts, such as displaying a 7.7% discount as an 8% discount. In such instances, lay beliefs would suggest that displaying an 8% discount (vs. a 7.7% discount) would increase purchase intentions. In this research report, however, we show that displaying a rounded-up, higher-value discount (8%) versus a more precise but lower-value discount (7.7%) reduces purchase intentions. Specifically, we show that using a more precise discount framing increases perceptions that the discount duration is shorter, in turn increasing purchase intentions. This research report presents a relevant and counterintuitive effect, and we propose contributions to work on both behavioral pricing and numerical information processing. Furthermore, this work has implications for practice, showing how to optimally display price discounts.