Probabilistic Promotions

What it is

Two explanations had become standard. One was that the jump from paying something to paying nothing feels larger than its arithmetic. The other was that people treat a small chance as bigger than it is.

Celia Gaertig and Joseph Simmons tested the question across five studies with 8,969 participants. The uncertain offer did better when the sure discount was actually smaller, when it sat beside a larger discount, and when it was written as a percentage instead of a cash amount. In that last case the chance, the prize and the average value were all unchanged. Only the presentation of the sure discount moved, and preference moved with it. The authors report that their findings are inconsistent with both standard explanations.

In effect

For a retailer, the same spin-the-wheel mechanic can be a good idea or a poor one depending on what else is on the page. Next to a large discount stated in money, it has little to offer. Next to a small one, or one written as a percentage, it gains ground.

For a shopper, the practical step is to turn every offer into a cash amount before comparing. Ten per cent off a fifty pound item is five pounds. Seeing the cash figure undoes the percentage framing, though not a discount that is genuinely small, and not entirely the effect of a bigger number placed beside it.

What it does not say

It does not say uncertain discounts work in general. Every study set the uncertain offer against a visible sure one, so an uncertain offer shown on its own is outside what was tested.

It does not measure revenue. The outcomes were choices and willingness within studies, so nothing here says whether a promotion makes or loses money.

It does not show how the effect behaves when the same offer is seen every week. And it is one new paper. A large five-study design in a strong journal is good initial evidence, and still initial.

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