By Natasha Elsner, MS
In 2010, HSM conducted a survey with doctors that included questions around pricing and volume discounting for a new pharmaceutical product administered in a practice-based setting. The client's objectives were to identify what level of discounting would shift purchasing from a 10-unit pack to a 50-unit pack.
Discounting from two initial price points was tested: (a) from a list price of $17.50 per unit and (b) from a list price of $13 per unit. The discounts were presented as a percent savings from the initial list price.
The question on volume discounting was posed in per-unit terms for about half of the respondents and in "lump sum" terms for the other half (randomly selected). Respondents were asked to indicate their preference between purchasing a 10-pack at the list price or a 50-pack at a discount.
As we expected, the responses differed depending on how the information was presented: Respondents were more likely to favor the larger pack size when cost and discounting were presented in per-unit terms.
• At the list price of $17.50 per/$175 total, respondents were significantly more likely to favor a 50-pack over a 10-pack when the question was posed in per-unit cost language as opposed to lump-sum language.
• At the list price of $13 per/$130 total, respondents were also more likely to favor a 50-pack when the question was posed as per-unit cost, but the differences were not statistically significant.
Figure 1. Preference between 10-pack at list price of $17. 50 per and 50-pack at discount
Figure 2. Preference between 10-pack at list price of $13 per and 50-pack at discount
Although "per unit" and "lump sum" may not account for all possible ways individuals approach "mental accounting" tasks in real life, our experience with this research is a reminder to account for such variability at the design stage which will pay off during data analysis and interpretation.