When targeted promotions appeal to non-targeted customers.
Consumers are a fickle lot. Case in point: It’s long been known that a consumer will be unhappy if he or she realizes that someone else got a better deal. So marketers tread very carefully when considering a promotion that targets one set of consumers for fear of alienating another.
However, according to three researchers, there are times when such a targeted promotion can work to the marketer’s benefit. Under certain conditions, non-targeted consumers are actually attracted to products for which a targeted group is reaping the benefits of a promotion.
How to Attract Customers by Giving Them the Short End of the Stick, a 2005 MIT Sloan School of Management working paper, is an outgrowth of Alison K.C. Lo’s dissertation at Duke University’s Fuqua School of Business. Lo, now a lecturer at the MIT Sloan School of Management, worked with professor of marketing John G. Lynch Jr. and professor of business Richard Staelin, both of Fuqua, to test how undergraduate and graduate students reacted to promotions that were not meant for them.
Through a series of five scenarios presented to different groups of students, the three researchers determined several conditions under which a targeted promotion made a product attractive to a non-targeted audience. The main conditions are that the targeted audience consists of individuals whom others consider to be experts and that the non-targeted audience is uncertain about a product’s quality. So the average consumer will defer to the expert group to determine which product is higher quality. This also means that a product’s quality has to be more important to the average buyer than is his or her individual taste.
For example, one study presented groups of participants with scenarios in which stores selling crystal products offered promotions to other consumers. In one promotion, “100 attendees to a conference on gemstones and geology” were given free luxury ferry rides to the store. It turns out that participants would be willing to pay $29 on average for their own trip to that store, versus the $18 offered up by a control group of participants who weren’t told of any promotions. After all, any store that invites gemologists must be selling high-quality crystal, reasoned the participants, so it would be worth patronizing.
On the other hand, respondents who heard that non-experts offered the luxury ride were willing to pay only $12 for the same ferry trip.