Why Online Shoppers Aren’t Falling for Exploding Deals
The Kmart blue light special was marketing gold.
With the signature announcement, “Attention, Kmart shoppers!” a sales associate would turn on a strobing blue light to direct customers to an item offered at an extra-deep discount for a very short time, usually an hour or less.
Kmart launched this gimmick in the mid-1960s, and it worked so successfully for decades that countless retailers adopted similar tactics to urge customers to buy. But that was long before the internet. Research co-authored by Wharton marketing professor Cait Lamberton explains why online consumers are far too savvy to fall for the same time-pressure tricks that work inside the store, like the old blue light special.
“Retailers will take the things that work offline and just translate them online and expect that they’re going to work. What we need to realize is that consumers are increasingly comfortable running the show in the online world,” Lamberton said to Wharton Business Daily on Sirius XM. “They’re not willing to go with the retailer to the same extent because online search costs are very low. Offline, if I don’t like what a retailer is doing, I have to get back in my car and drive somewhere else.”
The paper, “Examining the Efficacy of Time Scarcity Marketing Promotions in Online Retail,” was published in the Journal of Marketing Research. The co-authors are Jillian Hmurovic, marketing professor at Drexel University’s LeBow College of Business, and Kelly Goldsmith, marketing professor at Vanderbilt University’s Owen Graduate School of Management.
The study emphasizes the very different experiences of online and offline shopping and how those experiences can affect sales. The scholars said it’s imperative for retailers to understand and strategize differently for online, where shoppers aren’t caught up in the same frenzy sparked by a doorbuster or limited-time sale and feel less compulsion to purchase.
“In general, there’s room for more creativity. There’s room to say, ‘What capabilities do we have online that we don’t have offline?’ Let’s design promotions that use those capabilities, whether they relate to interactions with social media or whether they can translate very easily to mobile and online,” Lamberton said. “Retailers and marketers need to realize that the location where these things show up fundamentally changes the meaning that consumers get from them.”
The Pizza Experiment
Hmurovic came up with the idea for the study because she has long been interested in how both consumers and marketers are influenced by time. She was especially interested in the countdown timers and exploding deals that are ubiquitous online. So, the professors started by trying to replicate the effect of exploding deals, which are designed to motivate online consumers to grab as much merchandise as they can quickly, but none of their experiments yielded higher sales.
“We would change the size of the discount, we would change the kind of product, and we just couldn’t ever make it the case that when people had a countdown clock, they were willing to pay more or were more likely to buy than the same exact promotion without a countdown clock,” Lamberton said. “After you run enough studies, you realize this can’t just be a glitch in our study. There has to be something weird going on here that makes this not work in the same way online as it does offline.”
The professors believe the reason online shoppers don’t fall for time-pressured sales is persuasion knowledge, which is the awareness that consumers have about the attempts by marketers to manipulate them. In the solitary experience of online shopping, consumers see the exploding graphics and flashing countdown clocks and know that they are being strong-armed into a sale. And they don’t like it.
The professors studied this effect with a pizza promotion. In their experiment, participants received an online promotion for 30% off pizza. Some participants got the promotion with no time constraint, some got it as a today-only deal, and some got a coupon that stated the discount was being offered because “it’s your birthday.” The time-limited coupon triggered a lot of speculation for participants, who, in their open-ended responses, wondered about the quality of the product or whether the restaurant was trying to push the pizza because the ingredients were about to expire or too much dough was ordered.
“Consumers do think about why this is happening, and that doesn’t always work in favor of the retailer,” Lamberton said.
She said short-lived sales can work when online consumers believe the reason for the time crunch is beyond the retailer’s control, like a birthday or Christmas. For example, they ran an experiment that included a sale tied to Christmas and found it was slightly more effective than arbitrary deadlines. “But even then, they only work when you’re within that last day,” Lamberton said.
What Can Online Marketers Do?
In the paper, the professors make several recommendations based on their study:
- Online marketers should justify time scarcity promotions with an outside reason, such as Christmas or a birthday, to increase the chances of success.
- Deploying a shorter, rather than longer, online time scarcity promotion has greater potential to increase sales and reduce the retailer’s advertising costs.
- Retailers who rely heavily on online time scarcity promotions should temper their expectations.
Lamberton quoted Steven Silverstein, CEO of Spencer Spirit Holdings, who spoke to one of her classes and said: “People buy online, but they shop in the store.” She said his simple statement is a reminder that it’s very difficult to duplicate the in-person experience for digital shoppers.
“As much as we try to curate an online experience, so much of what is done online is driven by what we call performance marketing. That is, how many clicks are we getting, how many impressions are we getting? And that leads retailers to use the same tactics over and over,” Lamberton said.
She pointed to online news organizations as an example. Buzzfeed-style headlines have become the norm across different media as they vie for audience engagement.
“Everything starts to look exactly the same when what you care about are clicks,” she said. “You can become nearly commodified by chasing the same metrics everyone is chasing online.”