Online Retailers Love to Offer Limited-Time Deals, But Do They Really Work?
We’ve all seen brands and companies offer discounts for a limited time only. Are they so common that we tune them out, though, and does it make a difference whether they’re on a sign in a storefront or in an email in your inbox?
Assistant Professor of Marketing Jillian Hmurovic, PhD, explores these phenomena, both online and offline, in “Examining the Efficacy of Time Scarcity Marketing Promotions in Online Retail,” a paper co-written with Cait Lamberton, PhD, of the University of Pennsylvania’s Wharton School, and Kelly Goldsmith, PhD, of Vanderbilt University’s Owen Graduate School of Management and accepted for publication in the Journal of Marketing Research in July.
After becoming interested in time scarcity promotions as a concept, Hmurovic realized that much of the previous research on the topic had been conducted offline and before the advent of the Internet: analyzing the effectiveness of newspaper ads for brick-and-mortar retail stores, in contrast to the more sophisticated limited-time deals seen online with countdown timers.
“I know past research says this tactic should work, but I was having a very negative reaction to it because the timeframe seemed so arbitrary, and that sparked questions of how time scarcity promotions work online and how the traditional effects may change given how these promotions are currently implemented online,” she said.
As Hmurovic and her co-authors found, although both marketers and researchers have assumed that traditionally offline marketing tactics translate to online contexts, that’s not necessarily true. Online, time scarcity promotions are offered with countdown timers, shorter promotional windows, and greater frequency.
As a result, Hmurovic says, “consumers have become more knowledge about and familiar with these tactics as online retailing has grown.” In the online setting, the researchers found, time-scarcity promotions activate persuasion knowledge: awareness on the consumer’s part that they’re being marketed to.
“There’s a point at which you become more skeptical of the deal, and you’re both less likely and less willing to purchase the promoted product,” she explains.
After seeing that time-scarcity promotions didn’t work online as well as they did in previous offline studies, Hmurovic and her co-authors uncovered several methods that can reduce persuasion knowledge activation in an online setting. Most notably, time-scarcity promotions tended to perform better when retailers provided with an exogenous reason for the promotion’s limited time frame that was out of the retailer’s control: not two hours on a random Wednesday, but on a certain holiday or the consumer’s birthday.
One experiment compared online and offline effects, with groups of participants viewing two different video simulations of shopping experiences: one browsing a retailer’s website and another entering a brick-and-mortar store to browse.
“We compared how much online and offline shoppers would be willing to pay for a product promoted with versus without time scarcity tactics,” Hmurovic says. “Offline, the time scarcity promotion increased how much shoppers were willing to pay for the promoted product but online it had no effect, which was another indication that these promotions aren’t necessarily as effective online.”
This study ties together several of Hmurovic’s long-standing research interests: time and technology, and how they shape consumer behavior.
“Time scarcity promotions are different from quantity scarcity promotions in a lot of ways,” she says. “Time scarcity promotions saliently restrict how long consumers have to take advantage of a deal, and who sets the time? Usually, it’s the retailer.”
Hmurovic hopes this study can help marketers make better, more effective decisions: “Don’t assume that the old way of doing things will work, marketing tactics that may help retailers offline may be useless, or even detrimental, online. The retail context matters.”