Time-Based Deals: How Non-Monetary Discounts Can Reduce the Post-Promotion Dip: An Abstract

Abstract

Oftentimes, marketers and retailers offer promotions to attract customers. While offering such deals may increase revenue temporarily, it often also causes undesirable effects subsequent to the withdrawal of such deals. Once having seen the product go on sale at a lower price, customers may not be willing to buy it at the regular price anymore.

Foregone options that cannot be recouped should not influence present decisions. However, previous research has demonstrated that missing a superior opportunity affects consumers’ present decisions by creating a psychological cost. For example, when we have previously missed a great deal (e.g., 50% off retail price), buying the product at just 30% off may not seem attractive anymore, causing inaction inertia. This contributes to the pervasive “post-promotion dip,” where sales of a product decreases after it has been on a promotion.

One way to attenuate this effect would be to offer deals which do not arouse a strong negative comparison. However offering such weaker deals may not attract customers during the off-season. This begs the question: What kind of deals can attract customers during off-season but not cause a strong inaction inertia once it is withdrawn?

In this paper, we demonstrate an innovative solution to this widespread problem of the post-promotion dip. Instead of offering conventional price-based discounts, equivalent time-based deals could be offered (e.g., lower wait times, faster shipping).

Most of the inaction inertia literature has demonstrated the effect of foregone superior monetary opportunities (Tykocinski and Pittman 1998, 2001). However, missed opportunities may have been superior to current options not in terms of money but time. Consumers think about temporal costs differently than similar monetary costs (Okada and Hoch 2004). When people account for time, they show less economic sophistication and accountability than when they deal with money (Soman 2001). This lower accountability of time is likely a result of its malleable value and reduced fungibility (Saini and Monga 2008; Okada and Hoch 2004). This results in temporal payments being associated with lower “pain of payment” than similar monetary payments. We posit that people will experience lower inaction inertia when they have missed attractive temporal (vs. monetary) opportunities in the past.

Across three controlled experiments, we demonstrate that such non-monetary deals elicit lower “pain-of-payment,” thereby causing reduced inaction inertia. In Studies 1 and 2 we demonstrate that inaction inertia is lower for time. In Study 3 we provide confirmatory evidence for our proposed underlying mechanism by demonstrating that when accountability for time is reinforced, consumers start exhibiting inaction inertia even for time.