What Makes Deal-of-The-Day Promotions Really Effective? The Interplay of Discount and Time Constraint with Product Type

International Journal of Research in Marketing, Forthcoming

43 Pages Posted: 22 May 2015 Last revised: 17 Jun 2015

See all articles by Maik Eisenbeiss

Maik Eisenbeiss

University of Bremen - Faculty of Business Studies and Economics

Robert Wilken

ESCP Europe

Bernd Skiera

Goethe University Frankfurt

Markus Cornelißen

University of Muenster

Date Written: May 20, 2015

Abstract

Deal-of-the-day (DoD) promotions are nowadays very popular. As a special form of a price promotion, they allow firms to offer products at substantial price discounts, usually at or above 50%, for a very limited period of time, usually between one and seven days. Conventional wisdom suggests that both characteristics, high discount levels and tight time constraints, should make DoDs an effective form of a price promotion. However, the two characteristics do not necessarily combine to increase DoD effectiveness. In particular, the authors propose that depending on the type of promoted product (utilitarian vs. hedonic), the attention consumers pay to the discount level relative to the time constraint varies, which leads to differences in promotional effectiveness. Two studies, a lab experiment and a field study using data from the DoD platform Groupon, mostly confirm these hypotheses: the time constraint increases promotional effectiveness more for hedonic than for utilitarian products, whereas the discount level increases promotional effectiveness for utilitarian more than for hedonic products. In the Groupon data, very high discount levels actually decrease promotional effectiveness for hedonic products. The results suggest that designers of DoD promotions should consider the type of promoted product when choosing appropriate time constraints and discount levels.

Keywords: deal-of-the-day, price promotions, time constraint, discount level, promotional effectiveness

JEL Classification: M30, M31, M37

Suggested Citation

Eisenbeiss, Maik and Wilken, Robert and Skiera, Bernd and Cornelissen, Markus, What Makes Deal-of-The-Day Promotions Really Effective? The Interplay of Discount and Time Constraint with Product Type (May 20, 2015). International Journal of Research in Marketing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2608404

Maik Eisenbeiss (Contact Author)

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany

Robert Wilken

ESCP Europe ( email )

Heubnerweg 6
Berlin, 14059
Germany

Bernd Skiera

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt, 60323
Germany
+49 69 798 34640 (Phone)
+49 69 798 35001 (Fax)

HOME PAGE: http://www.skiera.de

Markus Cornelissen

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

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