Can Uncertainty Improve Promotions?

Kelly Goldsmith and On Amir
Journal of Marketing Research (JMR)
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Executive Summary
How to attract consumers with incentives that are appealing yet cost effective is a question that many marketers face. The literature on common attitudes toward risk would predict that adding uncertainty to an incentive (e.g., offering either a valued or an inferior reward as opposed to offering the valued reward with certainty) decreases its effectiveness, paralleling the decrease in expected value. Furthermore, previous research has shown that in the domain of gains, consumers tend to be risk averse and that, in general, adding uncertainty to any benefit makes it comparatively less attractive. However, there is ample evidence of promotions involving uncertainty being used in the marketplace. Examples include promotions involving sweepstakes, games of chance, contests, and instant-win games.

In an effort to reconcile the prevalence of such promotions with the existing research, this article explores the conditions under which uncertain promotions may be effective for retailers. Across a series of experiments, the authors demonstrate that uncertain incentives can generate a response on par with their best possible outcome under certain circumstances (e.g., in the absence of thoughtful consideration). These findings offer compelling insights for marketers: Adding uncertainty to an incentive may be one way to reduce promotion costs while maintaining consumer interest.

Biography
Kelly Goldsmith joined the marketing faculty at the Kellogg School of Management in 2009 as an assistant professor. Dr. Goldsmith’s research focuses on consumer decision making, specifically examining how consumers’ active goals and mind-sets affect their choices. Before joining Kellogg, Dr. Goldsmith obtained her PhD, MPhil, and MA in Marketing from Yale University.

On Amir is Associate Professor of Marketing in the Rady School of Management at the University of California, San Diego. He received his PhD in Management Science and Marketing from the Sloan School of Management at the Massachusetts Institute of Technology in 2003. He studies the behavioral effects of pricing and promotion, the evolution and dynamics of preferences and choices, and the mechanism underlying consumer decision making. He work has been published in Journal of Marketing Research, Marketing Science, and Journal of Consumer Behavior.

Journal of Marketing Research, Volume 47, Number 6, December 2010
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Kelly Goldsmith and On Amir
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