Findings in School Marketing Study Can Help Retailers Lure Back Consumers Dismayed By Missing a Sale
February 16, 2009
You know that awful feeling you get when you go back to find an item you were eying at 40 percent off only to find out it is now only marked down 10 percent? Retailers get a depressed feeling too by watching you walk away in frustration with your hands free of shopping bags.
But new research out of the School’s marketing department, to be published in the April issue of the Journal of Consumer Research, finds retailers can create environments that subconsciously help consumers release the feeling of regret (regret lock) and follow through on a purchase. The study, by Michael Tsiros, associate professor of marketing, finds that if retailers in such cases present an alternative but very similar product on sale after the first sale, consumers will release the regret lock and buy it.
“A trend retailers may be experiencing right now is one where consumers are sitting around and waiting for bigger rather than smaller sales (such as going out of business sales) to occur,” says Tsiros. “By waiting for these sales to occur, a regret lock could occur. If a marketer understands regret locks and how to help a shopper release them, it could prove to be very fruitful for them.”
In three laboratory studies and one field study, Tsiros worked with more than 600 participants and found the following to be true:
- When a customer does not know about a previous larger sale and a similar product is added to the choice of products on sale, the customer is more likely to put off a purchase.
- Conversely, when a customer does know about a previous larger sale and a similar product is added to the choice of products on sale, the customer is more likely to make a purchase and it is more likely to be the new, added item that will sell.
In addition, it is expected that the customer who missed a larger sale on a product will anticipate experiencing a high level of regret if he decides to buy the product during the current smaller sale. The level of regret depends on the difference between the two sales.
- If the two sales do not differ significantly, the research shows the customer will act in a manner similar to never having missed the first sale.
- If the two sales differ significantly, the research shows the consumer will experience a “regret lock” or anticipated experience of regret that forces them to not make a purchase.
- The “regret lock” may be released by the composition of the two sales. If the second sale is on a different product or also includes a different product that was not available during the first larger sale, the attractiveness of the new alternative will act as a regret-releasing mechanism.
- Both lab studies as well as a field study showed that 40 percent of customers followed through on a purchase when an alternative but similar product was added to a second, smaller sale. When no such alternative was offered during the second sale, only 20 percent of customers made a purchase in the product category. In addition, 73 percent selected the new alternative when it was offered during the second, smaller sale.
The study also shows how important timing can be in sales planning. Tsiros says it worth considering putting separate brands on sale at different times to ensure that consumers witness another sale on a different yet similar product. For instance, a Cuisinart coffee maker may have a higher profit margin for a store, so by offering a large sale on a Krups coffee maker first and then having another smaller sale afterwards on both products, most shoppers would choose the more profitable Cuisinart model.
“In this extreme economic climate, retailers are desperate for any tactics to encourage customers to buy, and tiny details in the composition of sales can make a real difference,” says Tsiros “This research shows marketers that it is very possible and economical to change the mind of a customer who otherwise may have walked out of the store regretful and empty-handed.”