Ahead #4 | The Hidden Power of a Third Price Option

Why discounts work — and how to make them work smarter

Discounts work. That’s something we all know. Consumers love the feeling of getting a better deal. It triggers reward systems in the brain and lowers the barrier to purchase.

But what if you could amplify the effect of a discount — without reducing your price any further?

Let’s say you sell a product for €6.99. When customers buy two, you offer a volume discount: €5.59 each.

Still, many consumers hesitate. Is it really a better deal? Is it worth buying two?

What happens if you add one more price option?

• Regular price: €6.99

• Buy 1 for €6.79

• Buy 2 for €5.59 each

That one extra option — a price point between the regular price and the volume discount — isn’t just a clever trick. It’s a proven conversion driver. It acts as a powerful psychological anchor that increases the perceived value of your discount, without you needing to lower the price a single cent further.

And this isn't theory — it’s science. Researchers from Johns Hopkins University ran five rigorous studies with over 3,500 participants, spanning real-world ad experiments, incentive-compatible purchase tasks, and carefully controlled lab scenarios.

They tested:

• Different product categories (hand sanitizer, cookies, chocolate)

• Multiple price points and discount depths

• Customer segments: from price-savvy repeat buyers to shoppers with low price knowledge or distrust in list prices

The results? Crystal clear:

➝ Adding one well-positioned intermediate price consistently increased the likelihood of customers taking the volume discount — as long as it was done strategically.

And that’s what makes this paper so valuable: it doesn’t just show that multitier discounts work, it reveals why, when, and for whom they work — with precise data and clear boundary conditions.

This week in the premium edition:
✅ The psychological mechanisms behind the multitier discount effect
✅ When it works — and when it doesn’t
✅ How much price difference you need between options
✅ What types of customers respond best
✅ How to test and implement it safely in your store

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