The positive effects of a discount are soon lost when the gap between payment and consumption grows, i.e. delays kill goodwill, researchers from the Columbia Business School and the Rotman School of Management reported in the Journal of Consumer Research.
‘Goodwill’ refers to the established reputation of a company – it is regarded as a quantifiable asset, i.e. it has a value. A company that is worth more than the sum of its parts has goodwill value.
Professor of Marketing Leonard Lee and Associate Professor of Marketing Claire Tsai emphasized that any goodwill the retailer has earned when selling a product at a discount fades away rapidly if the consumer then has to wait longer than expected.
The authors wrote:
“This might spell trouble for online retailers like Amazon that offer discounted items and then force consumers to wait for the product. Our research shows that even if the wait is relatively short – as little as 15 minutes – the consumer’s enjoyment of the product decreases dramatically.”
“Keeping in mind that instant gratification has become a hallmark of society, brick and mortar businesses can add value to their bottom lines by offering in-store promotions on the products they know people want to experience immediately rather than waiting for delivery. This is a key competitive advantage they could have over online retailers and one that might secure their long-term survival in an expanding online marketplace.
Four experiments proved delays kill goodwill
The researchers carried out four experiments across a range of hedonic (enjoyable, as opposed to essential) products to determine what the relationship between consumption and enjoyment is.
They found that the shopping euphoria felt by a consumer after receiving a discount is fleeting – it only occurs when the product is consumed immediately after payment. In other words, as far as discounts are concerned, delays kill goodwill pretty much straight away.
Delays kill goodwill more for those who had a discount
Participants were asked by buy an orange juice. They were told all the juices had an identical retail price, but half of them were given a 50% discount while the other half had to pay the full price.
Then half of ALL the participants – both those with and without discounted prices – were given their juice immediately after payment, while the other half had to wait 15 minutes.
Lee and Tsai found that for the consumers who received a discount and received their orange juice immediately, “the experience was significantly amplified”. However, the ones who had received discounts and had to wait 15 minutes made much less favorable comments. “In fact, when asked if consumers would purchase the juice in the future, those who waited said they would be less likely to purchase the item down the line.”
Those with discounts who had to wait were less satisfied than full price payers who had to wait.
In another experiment consumers paid for and downloaded music. The results were similar – the ones who received a discount and had to wait enjoyed the music much less compared to the consumers who got their product straight away.
The authors wrote:
“If you consider the consumer relationship from a long-term standpoint, in terms of customer satisfaction and brand loyalty, marketers in big box stores might want to pay more attention to the instant gratification factor because this is something no online retailer can provide at this time.”
In other words, if delays kill goodwill, big box stores can do something about it, but online retailers can’t (unless the product is downloadable).
On October 16th, Market Business News reported on Tsai and Lee’s experiment with chocolate truffles.