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Small Probabilistic Discounts Stimulate Spending: Pain of Paying in Price Promotions

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  • Chang-Yuan Lee
  • Carey K. Morewedge
  • Guy Hochman
  • Dan Ariely

Abstract

We find that small probabilistic price promotions effectively stimulate demand, even more so than comparable fixed price promotions (e.g., "1% chance it's free" vs. "1% off," respectively), because they more effectively reduce the pain of paying. In three field experiments at a grocer, we exogenously and endogenously manipulated the salience of pain of paying via elicitation timing (e.g., at entrance or checkout) and payment method (i.e., cash/debit cards or credit cards). This modulated the attractiveness of probabilistic discounts and their ability to stimulate spending. Shoppers paying with cash or debit cards, for example, spent 54% more if they received a 1% probabilistic discount than a 1% fixed discount (experiment 2). A fourth experiment showed that consumers' sensitivity to pain of paying modulates the greater comparative efficacy of small probabilistic than fixed discounts. More broadly, the results elucidate a novel affective route through which price promotions stimulate demand--pain of paying.

Suggested Citation

  • Chang-Yuan Lee & Carey K. Morewedge & Guy Hochman & Dan Ariely, 2019. "Small Probabilistic Discounts Stimulate Spending: Pain of Paying in Price Promotions," Journal of the Association for Consumer Research, University of Chicago Press, vol. 4(2), pages 160-171.
    • Handle: RePEc:ucp:jacres:doi:10.1086/701901
    DOI: 10.1086/701901
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    Cited by:

    1. Aleksandra Kovacheva & Hristina Nikolova, 2024. "Uncertainty marketing tactics: An overview and a unifying framework," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 1-22, January.
    2. Kastanakis, Minas N. & Magrizos, Solon & Kampouri, Katerina, 2022. "Pain (and pleasure) in marketing and consumption: An integrative literature review and directions for future research," Journal of Business Research, Elsevier, vol. 140(C), pages 189-201.
    3. Camilleri, Adrian R. & Dankova, Katarina & Ortiz, Jose M. & Neelim, Ananta, 2023. "Increasing worker motivation using a reward scheme with probabilistic elements," Organizational Behavior and Human Decision Processes, Elsevier, vol. 177(C).
    4. Nigam, Achint & Dewani, Prem & Behl, Abhishek & Pereira, Vijay, 2022. "Consumer’s response to conditional promotions in retailing: An empirical inquiry," Journal of Business Research, Elsevier, vol. 144(C), pages 751-763.
    5. Attari, Amin & Chatterjee, Promothesh & Singh, Surendra N., 2022. "Taking a chance for a discount: An investigation into consumers’ choice of probabilistic vs. sure price promotions," Journal of Business Research, Elsevier, vol. 143(C), pages 366-374.
    6. Karl Akbari & Udo Wagner, 2021. "Playing When Paying and What Happens Next: Customer Satisfaction and Word-of-Mouth Intention in Gambled Price Promotions," Schmalenbach Journal of Business Research, Springer, vol. 73(2), pages 243-271, June.

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