The anticipated regret of a lost opportunity: When adding a second‐period incentive reduces the appeal of a one‐period promotion

Abstract

AbstractEconomic theory assumes that an improvement in the financial benefit of a promotional offer should increase the appeal of the offer (e.g., $25 incentive >$20 incentive). Four studies show that this assumption does not always hold. A two‐period promotion (e.g., $20 off a purchase today plus $5 off a purchase made next month) is valued less than a one‐period promotion (e.g., $20 off a purchase today), with an identical first‐period incentive, when the second‐period incentive has a limited benefit relative to the first‐period incentive. Second‐period incentives negatively impact the perceived value of a two‐period promotion when consumers anticipate a low likelihood of redeeming the second‐period incentive. The negative impact of the second‐period incentive can be remedied by making the second‐period incentive financially larger or by reducing the perceived restrictiveness of redeeming the second‐period incentive.