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How to Attract Customers by Giving Them The Short End of The Stick

March 28, 2007

DURHAM, N.C. –-  Groucho Marx famously said that he wouldn't want to join any club that would have someone like him as a member. But if you are on the outside of some deal that benefits another group more than you, would this make you more or less interested in the product?

For example, guess how female Victoria's Secret customers would react if they found out that male customers got better deals on the same items. How would plus-sized women react to a dress that is sold for less in smaller sizes?

According to research from Duke University's Fuqua School of Business, the excluded consumers would be turned off and would be less likely to make a purchase.

But how would competitive swimmers react to a product claimed to improve speed if they knew the product is given away free to Olympic swimmers? How would vodka consumers react to superpremium Belvedere vodka if the company offered free tastings exclusively for bartenders?

In these examples, the consumer ends up wanting the product more, said Alison K. C. Lo, a recent doctoral graduate at the Fuqua School of Business. She and marketing professors John Lynch and Richard Staelin explain why in the article "How to Attract Customers by Giving Them the Short End of the Stick," published in the February 2007 Journal of Marketing Research.

"As consumers, we sometimes buy things when we feel clueless in telling good-quality products from bad but we think more savvy consumers can tell the good stuff simply by inspecting the merchandise," Lo said. "In such cases, naive consumers are attracted to a product with a freebie that is not available to them but is offered to a more savvy group of buyers, like bartenders or Olympic swimmers. These savvy buyers presumably would turn up their noses at low-quality merchandise, so the naive consumers reason that products promoted to experts must be good.

"On the other hand, if we are excluded from a deal and the group benefiting is not more savvy or we are more certain of the product's quality, we are put off," she explained. "We buy less -- like the woman who sees that Victoria's Secret is offering a better deal to men than to women."

In one experiment reported by Lo and her colleagues, student volunteers in Duke's master of business administration program were asked to choose which of two cordless drills they would prefer to receive as a gift.

The researchers tested the effects of varied promotions by pairing the drills with either a $15 Nordstrom gift card or the book "Graphic Guide to Frame Construction: Details for Builders and Designers."

The study participants overwhelmingly preferred the gift card, but they thought the book would be more appealing to people with expertise in construction and carpentry.

Participants then were asked to guess the prices of the drills, and they gave a higher price to whichever drill was paired with the book compared with the one paired with the gift card.

"This is important because even though the book was not as valuable as the gift card to our participants, they realized the book would be valuable to someone who might know a good drill when he or she sees one," Lynch said. "They reasoned that only a manufacturer of a high-quality drill could lure such an expert to buy."

The research team found similar results in experiments focusing on other products, including camcorders and headphones.

The researchers say the findings challenge some long-held notions regarding consumer reaction to targeted promotions. "Our findings apply to a specific set of circumstances where the customer is not able to judge the quality of a product, but believes that other consumers are expert in judging that product," Staelin said. "But a lot of marketers sell in exactly those kinds of categories, so our findings can be used to sell products from wine to jewelry to home electronics to financial services."