Alison K.C. Lo, John G. Lynch Jr., and Richard Staelin
Executive Summary
It has long been known that a consumer will be unhappy if he or she realizes that someone else got a better deal—that is, when the consumer believes that he or she got the short end of the stick. Thus, marketers tread carefully when they consider a promotion that targets one set of consumers for fear of alienating another. However, this article shows that there are times when such a targeted promotion can lead nontargeted consumers to be attracted to products even though the targeted group reaps the benefits of the promotion. This surprising result is obtained when customers cannot judge quality before purchase but believe that the favored target group can. Consumers reason that only a high-quality seller could make money trying to attract these discerning customers.
In five experiments, the authors document several conditions under which a targeted promotion makes a product attractive to a nontargeted audience. In one study, participants are asked to choose between two stores that offer a crystal product of uncertain quality. In all the experimental conditions (except for the control), one of the stores offers a promotion for a specific customer group that excludes the respondents, thus giving them the short end of the stick. Identities of the customer group that receive the exclusive promotion were manipulated. When respondents perceived the promotion beneficiaries as experts on crystal products, they were willing to pay an average amount of $29 for their own trip to the targeting seller, compared with the $19 average by a control group of participants who were not told of any promotions. In contrast, respondents who were told that the same privilege was bestowed on a customer group that has no special expertise were willing to pay only $12 to get to the store, indicating a reduced desire to shop at the store when the promotion was given to those guests.
A second study pitted two fictitious camcorders with comparable specifications. Each was then paired with a different promotion: a $30 gift certificate to Wal-Mart or a $30 coupon for a Seagate external hard drive, which a technologically savvy buyer might use to store digital photos or video. Participants responded that they preferred the Wal-Mart gift certificate over the Seagate promotion, which held little personal appeal. When one promotion was paired with each camcorder, however, the authors found that participants preferred whichever camcorder came with the hard drive promotion, even though the camcorders were comparable and, on its own, the Wal-Mart promotion was preferred. This occurred because the hard drive promotion was perceived as something that discerning, high-end camcorder buyers would prefer.
The authors show that consumers are attracted by the seller’s effort to cater to discerning buyers only when quality is made salient. For example, consumers are more attracted by the short end of the stick when consequences of choice are real than when they are hypothetical—that is, when the nontargeted participants were given a chance to get the product they selected. They also show that such attraction is stronger when the consumer is more uncertain about product quality.
The authors believe that these findings could be applied to several promotional situations, including free shipping for inspection, promotions to knowledgeable investors to attract uncertain novices to buy difficult-to-evaluate financial services, or even product placement decisions. For example, products sold in specialty stores (e.g., shampoos exclusively sold in professional salons) might be inconvenient and inaccessible to the infrequent patrons. However, this inconvenience can be an appealing signal if the infrequent patrons believe that frequent patrons are more quality discerning than they are.
Biography
Alison K.C. Lo is a postdoctoral associate in the Sloan School of Business at Massachusetts Institute of Technology. She earned a doctoral degree in Marketing from the Fuqua School of Business at Duke University and a master’s degree from Hong Kong University of Science and Technology. Her research interests include judgment and decision making, consumer behavior, behavioral game theory, and experimental economics. Her work has appeared in Organizational Behavior and Human Decision Processes, MIT Sloan Management Review, and Marketing Science.
John G. Lynch Jr. is Roy J. Bostock Professor of Marketing in the Fuqua School of Business at Duke University. Lynch is past president of the Association for Consumer Research, past associate editor for Journal of Consumer Research, and past associate editor and coeditor of Journal of Consumer Psychology. His published work focuses on consumer behavior and validity issues in behavioral research methodology. His current research focuses on consumer decision making. He is the 2003 recipient of the Society for Consumer Psychology’s Distinguished Scientific Contribution Award and the 2004 recipient of the American Marketing Association’s Paul D. Converse Award for Outstanding Contributions to the Science of Marketing. He is a fellow of the American Psychological Association and fellow of the Society for Consumer Psychology. Four of his articles have been honored as outstanding article of the year, twice by Journal of Consumer Research, once by Journal of Marketing Research, and once by Journal of Marketing. His 1997 article on Internet shopping is the second-most cited work to appear in any marketing journal from 1997 to the present, and his 2000 paper on price sensitivity on the Internet is the second-most cited paper to appear in any marketing journal from 2000 to the present. He is a member of the editorial boards of Journal of Consumer Research, Journal of Consumer Psychology, Journal of Marketing Research, and Journal of Marketing.
Richard Staelin is Edward and Rose Donnell Professor of Business Administration in the Fuqua School of Business at Duke University. He holds two bachelor degrees in Engineering, an MBA, and a PhD from the University of Michigan. Dr. Staelin has published more than 70 articles in academic journals on a diverse set of subjects. His 1993 Journal of Marketing Research article on service quality won the O’Dell award, and his 1986 article on sales force compensation was given the best-paper award in Marketing Science. He has served on more than 40 PhD committees, and his students have gone on to have successful academic careers. In 1991–1992, he was the executive director of the Marketing Science Institute. He was the editor of Marketing Science from 1994 to 1997, and in 2004 and 2005 he was consulting editor for the Journal of Marketing special issue on customer relationship management. In 1996, he was given the American Marketing Association Distinguished Educator award in recognition of his impact on the marketing profession, and in 2000, he was awarded the Converse Award by the American Marketing Association. He is currently president elect of INFORMS Society for Marketing Science.
Journal of Marketing Research, Vol. XLIV, No. 1, February 2007
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