Purpose - The purpose of this study is to examine if consumers, after missing an attractive opportunity to buy a desired product (e.g., a $100 box of chocolates for $50), prefer to buy the chocolates either at a smaller discount (e.g., $25-off discount; pay $75) or pay full price but offset some of it with windfall money (e.g., use $25, $50, or $75 lottery wins to pay the full price of $100).
Design/methodology/approach - In four experiments, participants imagine that they have missed an opportunity to buy a box of chocolates at a discounted price ($50 off), and are offered a second chance to 1) buy the chocolates at a less attractive discount ($25), or pay full price, but partially offset it with (2) a small windfall ($25 lottery win), (3) large windfalls ($50, or $75 lottery wins), or 4) $50 store gift card. They report (1) the unhappiness of losing the discount opportunity, (2) the happiness of receiving the second discount/windfall cash/store gift card, (3) the opportunity cost of spending the windfall money, and (4) the likelihood of buying the focal product.
Findings - Participants were more likely to buy the chocolates at the less attractive (second) discount rather than pay full price using windfall money. In doing so, they showed that they were willing to be more, rather than less, poor from an overall wealth perspective to acquire the chocolates. This anomaly surfaced irrespective of the windfall amount (meeting or exceeding the lost discount opportunity), and the method of investigation (joint versus separate evaluation). The negative transaction utility of paying full price mediates the purchase method effect (discount vs. windfall) on purchase likelihood. Gift cards, however, were able to reduce the negative transaction utility of paying full price Research limitations/implications - All studies were carried out in a laboratory environment, used student subjects, and tested purchase likelihood for a hedonic product. The findings need to be replicated across a wider array of products, and in a field setting (actual retail purchases).
Practical implications - The current research offers suggestions as to how retailers can manage the "post-promotion dip" by using rewards that facilitate integration (cancellation) of a missed discount (e.g., store gift cards instead of cash) and reduce the negative transaction utility of paying full price.
Originality/value - The research reveals a judgmental anomaly in how consumers assess the value of acquiring a hedonic product, and suggests that consumers may need to be trained to recognize such decision traps. The findings also suggest that marketing managers might be able to reduce a consumer�s reluctance to make purchases after missing a sale event by strategically matching rewards with the source of the lost discounts.
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