Can Uncertainty Improve Promotions?
Northwestern University - Kellogg School of Management
University of California, San Diego (UCSD) - Rady School of Management
Goldsmith, Kelly and On Amir (2010). “Can Uncertainty Improve Promotions?” Journal of Marketing Research, 47, 1070-1077
When should retailers offer promotions with uncertain rewards? The current research investigates this question and finds there are instances when uncertain incentives may seem more attractive than their expected value. For example, a lottery between small and large rewards may even be as attractive as the large reward for certain. We demonstrate this effect in hypothetical scenarios as well as a field experiment involving actual purchases. We suggest that this effect occurs because consumers exhibit reflexive positivity whereby their intuitive appraisal of the lottery leads to a response beyond what would be justified by an expected value consideration. This underlying psychological mechanism informs research on risk and uncertainty and outlines boundary conditions for this positive effect of uncertainty that have direct practical implications for marketers.
Number of Pages in PDF File: 9
Keywords: Uncertainty, Promotions, Wishful Thinking, Optimism
JEL Classification: D80, D81, E3, M3, M31
Date posted: June 2, 2007 ; Last revised: October 3, 2013