Abstract
Chance-based price promotions (or gambled price discounts, GPDs), whereby discounts are determined randomly by the spin of a wheel or the roll of a dice are ubiquitous in the marketplace (e.g., Sears, Dick’s Sporting Goods etc.). GPDs are a cost-efficient promotion technique for retailers as they keep internal reference prices intact (Alavi et al., 2015) and generate excitement and buzz among shoppers (Lee & Qiu, 2009) with their element of anticipation/surprise. However, there is little work examining how the surprise of winning or not winning the discount affects the short and long-term post-promotion reactions of the shoppers. We tested these reactions by conducting three laboratory studies. Study 1 found that the surprise felt by the winners (non-winners) amplified their happiness (unhappiness) associated with paying the discounted price (full price) and the latter, in turn, increased (decreased) their store loyalty. Study 2, focusing on the winners, found that taxing the winning amounts tarnished the positive effects, irrespective of whether the tax amount was small or large. Finally, Study 3, focusing on the non-winners, found that offering consolation prizes reversed Study 1’s negative effects, but only if such prizes were substantial. Managerially, our results suggest that store managers need to monitor the shoppers’ post-promotion reactions to the GPDs, trying not to tarnish the joy of winners while offsetting the disappointment of the non-winners.