When Do Consumers Prefer Uncertain Promotions?

Operations, Information, and Decisions Department; Faculty Adviser: Joseph Simmons

Retailers use promotions to attract consumers and increase their spending. Promotions can come in different forms, such as price discounts or small gifts with a purchase. Typically, a consumer knows for sure what promotion he will receive with a purchase. However, retailers have also started to adopt promotions that are coupled with uncertainty, whereby the consumer has a less than 100% chance to receive the promotion.

Past research has provided mixed evidence on the effectiveness of such uncertain promotions. While some papers suggest that uncertain promotions increase consumers’ purchase likelihood and spending (e.g., Goldsmith & Amir, 2010; Mazar, Shampanier, & Ariely, 2016), other work demonstrates that people are merely tolerant of uncertain promotions, but don’t particularly like them (e.g., Dhar et al., 1995, 1999). The goal of the current project is to identify the conditions under which consumers like vs. dislike uncertain promotions. The findings from our studies will provide insight into when uncertain promotions will be more or less effective in the retail setting.