Attractive By Association

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. What’s more, in this scenario, because the promotion did not target an exclusive “expert” group, it simply turned many people off because they felt left out for no apparent reason.

To be sure, an endorsement from an expert is a time-honored marketing strategy, be it for power tools, sneakers or toothbrushes. But this research adds some nuance to how a company might exploit the strategy for its promotions. “[Consumers] don’t even need to observe whether the expert buys the product or not,” says Lo. The research demonstrates that a promotion must only appear more attractive to an expert to convey an expert’s imprimatur. One of the five studies involved two fictitious camcorders with identical prices and specifications. Each was offered with either a $30 gift certificate to Wal-Mart or a $30 coupon for a Seagate external hard drive, which a tech-savvy buyer might use to store digital photos or video.

For either camcorder, participants responded that they preferred the Wal-Mart gift certificate over the Seagate promotion, even though they were of the same monetary value, because they could use the gift certificate to buy whatever they wanted, rather than just a hard drive. However, when each camcorder was offered with just one of the two promotions, the researchers found that participants preferred whichever camcorder came with the hard-drive promotion — even though the camcorders were equivalent and, evaluated on its own merit, the Wal-Mart promotion had been preferable. Why? Because the hard drive promotion was perceived to be something that high-end camcorder buyers would prefer.

Promotions could take a variety of forms beyond free transportation and gift certificates. For example, a marketer could offer free shipping and returns for experts to inspect a product before buying, or could sell products through specialty outlets that seem expert-oriented. For example, “shampoos sold exclusively in professional hair salons,” says Lo, “are inconveniently accessible to all but the most regular salon patrons. That inconvenience can be appealing to other customers,” because what the salon’s presumed expertise says about the hair care product trumps the inconvenience of traveling to the salon to make a purchase.

For more information, contact Alison K.C. Lo at alisonlo@mit.edu.