Giving shoppers a choice between two discount formats reduced purchases compared with offering a single promotion in a set of studies, researchers have found.
The research, published in the Journal of Business Research, examined a menu combining a fixed discount with a probabilistic promotion, in which the size or availability of a saving depends on chance.
Across two field studies and a preregistered online study, the authors found lower purchase incidence under the menu. Among people who did buy, however, those choosing from a menu showed greater subsequent consumption in the research. The results point to a trade-off rather than a universal rule against offering choice.
A certain saving or a chance of more
A fixed promotion tells a customer what the discount will be. A probabilistic promotion introduces uncertainty, for example by offering a chance of a larger saving. Such offers can appeal to customers who enjoy the possibility of a better deal, while a guaranteed reduction may suit people who prefer certainty.
It might seem that presenting both options would accommodate both preferences. The researchers, Ruonan Zhang, Xing Zhang and Hang Wu, instead found that a menu could make the options less attractive when considered together.
The authors describe this as preference cannibalization: the presence of an alternative can reduce the perceived value of an option. Their university research summary emphasizes that the result concerns the tested promotion designs, rather than all choices customers encounter.
Buying and using are different decisions
The researchers also looked at what happened after purchase. Among customers who bought, the menu condition was associated with greater post-purchase consumption in the studies. They interpret the pattern in relation to a sunk cost effect, a tendency to consider resources already committed when deciding whether to continue using something.
This does not mean a business can assume its profits will rise simply because purchasers use a product more. A promotion that attracts fewer buyers may still perform worse overall, depending on margins, redemption costs and how much customers spend later.
It also does not establish that uncertainty is inherently better or worse than a fixed discount. The question was how the offers performed when presented together compared with a single promotion in the particular tests.
What retailers can test
A business considering a promotion can compare a simple offer with a menu while keeping the audience, timing and other conditions as similar as possible. It can then track the proportion who purchase, the cost of the discount, returns and later customer behavior.
Clear terms are essential when a saving depends on chance. Customers need to understand what they might receive and any conditions before they decide. An experiment should also be large enough to distinguish a meaningful difference from ordinary variation.
Other MBN reporting has examined how discount requirements can change buying behavior. Together, the findings show why the design of an offer deserves as much attention as the size of the advertised saving.
