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The Goal-Gradient Hypothesis Resurrected: Purchase Acceleration, Illusionary Goal Progress, and Customer Retention
Abstract
The goal-gradient hypothesis denotes the classic finding from behaviorism that animals expend more effort as they approach a reward. Building on this hypothesis, the authors generate new propositions for the human psychology of rewards. They test these propositions using field experiments, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key findings indicate that (1) participants in a real café reward program purchase coffee more frequently the closer they are to earning a free coffee; (2) Internet users who rate songs in return for reward certificates visit the rating Web site more often, rate more songs per visit, and persist longer in the rating effort as they approach the reward goal; (3) the illusion of progress toward the goal induces purchase acceleration (e.g., customers who receive a 12-stamp coffee card with 2 preexisting "bonus" stamps complete the 10 required purchases faster than customers who receive a "regular" 10-stamp card); and (4) a stronger tendency to accelerate toward the goal predicts greater retention and faster reengagement in the program. The conceptualization and empirical findings are captured by a parsimonious goal-distance model, in which effort investment is a function of the proportion of original distance remaining to the goal. In addition, using statistical and experimental controls, the authors rule out alternative explanations for the observed goal gradients. They discuss the theoretical significance of their findings and the managerial implications for incentive systems, promotions, and customer retention.
... Likewise, apps monetized through in-app advertising or purchases require engagement with value-added activities (e.g., watching ads, buying additional app features) to create value for the app provider. To reinforce value-added engagement, many app providers reward those value-added activities with discounts or coupons (hereinafter, "value rewards"), well-known from traditional loyalty programs (e.g., Kivetz, Urminsky, and Zheng 2006). By rewarding value-added engagement through traditional rewards and rewarding game engagement through game rewards, an app's reward architecture becomes hybrid. ...
... Prior research has focused on the consequences of rewarding value-added engagement (e.g., Kivetz, Urminsky, and Zheng 2006;Leenheer et al. 2007). We are aware of only one study investigating the consequences of rewarding game engagement. ...
... This work is the first to link an individual model of actual user engagement to an app's reward architecture. Unlike prior research focusing almost exclusively on the role of value rewards (e.g., Kivetz, Urminsky, and Zheng 2006;Leenheer et al. 2007), our model captures the simultaneous effects of game and value rewards on individual-level game and value-added engagement. We use a unique dataset from a gamified market research app. ...
Many mobile app providers offer their apps for free and base their business models on user engagement. However, declining app usage over time threatens the ability of apps to add business value. To keep users engaged, app providers use gamification, i.e., they use game elements (e.g., levels, points) in their non-game apps. Complementing traditional loyalty strategies that reward value-added activities (e.g., purchases) through value rewards, gamification rewards ongoing engagement through game elements. Thus, reward architectures of many apps have become hybrid, with value- and game-reward pursuit simultaneously driving engagement. However, it is unclear to what extent gamification helps to drive user engagement and add business value. To address this question, the authors study unique data from a gamified market research app comprising daily individual-level app usage observations of 18,952 users. The findings show that game rewards increase engagement significantly over and above value rewards, leading to a lift in business value, especially when users are in closer proximity to both types of rewards. However, the analysis also shows a dark side of gamification: when users enter a state of flow in the game, game engagement has a weaker effect on value-added engagement. The authors discuss implications for gamified reward architectures.
... In many cases, it is the perceived (and not necessarily the objective) amount of progress that an action is capable of generating that determines motivation. For example, the goal gradient effect (Kivetz et al., 2006) and the stuck-in-the-middle effect (Bonezzi et al., 2011) are both explained by the notion that (the same) goal-consistent action is perceived to be more impactful when a goal-seeker is nearer to (vs. farther from) a reference point; it is this difference in the perceived goal progress that an action can generate that influences motivation. ...
... The second contribution of this research is to the literature on perceived goal progress as the driver of motivation. The notion that perceived goal progress is a robust driver of motivation is not new (Bonezzi et al., 2011;Bryksina, 2020;Etkin & Laran, 2019;Kivetz et al., 2006;Wallace & Etkin, 2018), but it has predominantly been documented in the context of individual-level goals. Our research is the first, to our knowledge, to explicitly demonstrate that perceived goal progress is a motivational driver in group-level goals as well. ...
... Our research is the first, to our knowledge, to explicitly demonstrate that perceived goal progress is a motivational driver in group-level goals as well. Our work also adds to the growing body of research identifying factors that affect perceived goal progress, such as reference points used to evaluate progress (Bonezzi et al., 2011;Bryksina, 2020;Kivetz et al., 2006;Wallace & Etkin, 2018), choice freedom during goal-consistent choice (Etkin & Laran, 2019), and effort exerted to generate progress on a goal (Rafieian & Sharif, 2023). We identify a novel factor-whether an action facilitates one's own or a group member's progress-that influences the perception of goal progress generated by an action. ...
Examining factors that motivate individuals to contribute to the attainment of collective outcomes is a worthwhile effort, as many valuable goals are pursued at a group level. The current research identifies a novel phenomenon that provides insight into motivational dynamics of group-level goals. The results of four studies demonstrate that actions that facilitate the progress of a group member can be more motivating than actions that facilitate one’s own progress; this happens because actions that facilitate the progress of a group member are perceived as more impactful and capable of generating a greater amount of overall progress toward the group-level goal than equivalent actions that facilitate objectively the same amount of one’s own progress. Theoretical and practical implications are discussed.
... Our research aims to reveal the dynamics of the relationships between these two perceptual contingencies. For this, we use the goal proximity effect (Hull, 1932;Kivetz, Urminsky & Zheng, 2006), widely used in collective effort research (e.g., Jensen, King & Carcioppolo, 2013;Kim & Reeck, 2019). Across five experiments including two field studies, we examine how collective goal proximity increases individuals' collective action intention (H1) through perceived behavioral impact (PBI, H2) and collective outcome expectancy (COE, H3). ...
... According to the goal proximity effect, people's motivation gets stronger as they get closer to a goal (Hull, 1932;Kivetz et al., 2006). This effect is also found in collective actions, such as crowdfunding (e.g., Barros et al., 2020;Dai & Zhang, 2019;Kuppuswamy & Bayus, 2017), ...
... People's perceptions of the impact of their behaviors change based on their proximity to personal goals (Heath, Larrick & Wu, 1999) and their personal reference point (Kivetz et al., 2006). ...
Although it is imperative to act collectively for the environment, people are often reluctant to do so, partly because they perceive the impact of their behavior to be limited. This research explores the effect of goal proximity to examine perceptual contingencies in collective action. Drawing on the collective effort model, it examines how pro-environmental behavior can be affected by perceived behavioral impact (i.e., how individuals perceive their behaviors on collective performance) and collective outcome expectancy (i.e., how individuals expect collective performance to lead to desirable collective outcomes). Results from two field experiments and three controlled experiments revealed an effect of goal proximity on collective action intention (H1). This effect was mediated by perceived behavioral impact (H2) and collective outcome expectancy (H3). Interestingly, perceived behavioral impact affected collective outcome expectancy (H4); thus, the goal proximity effect was sequentially mediated (H5). However, these effects dissipated when individuals compared the impact of their own behavior to that of others and perceived it as having less impact. In sum, this research suggests that individuals’ perception of the impact of their own behavior on collective performance is the key factor in promoting collective action for the environment.
... The retailing literature indicates that loyalty programs affect consumers who engage with the program through two mechanisms ( Dorotic et al. 2014 ;Kim, Steinhoff, and Palmatier 2021 ;Kopalle et al. 2012 ;Taylor and Neslin 2005 ). The points pressure mechanism reflects customers' increasing expenditure and/or their purchase rate during the promotional period to accumulate points ( Kivetz, Urminsky, and Zheng 2006 ;Kopalle et al. 2012 ;Taylor and Neslin 2005 ). The rewarded behavior mechanism refers to the long-term impact of the promotion, where consumers increase their purchase rate after redeeming the reward ( Blattberg, Kim, and Neslin 2008 ;Taylor and Neslin 2005 ). ...
... Within a loyalty program, points pressure is driven by changing incentives in the marketplace, with higher benefitsthrough points -associated to the retailer's products that feature in the program ( Meyer-Waarden 2007 ;Stourm, Bradlow, and Fader 2015 ). Points pressure is motivated by the desire to obtain a reward, and the purchase of goods makes the reward more accessible during the promotion ( Belli et al. 2022 ;Bijmolt, Dorotic, and Verhoef 2011 ;Bombaij and Dekimpe 2019 ;Henderson, Beck, and Palmatier 2011 ;Kim, Steinhoff, and Palmatier 2021 ;Kivetz, Urminsky, and Zheng 2006 ). The presence of points associated to the purchase of goods in the focal category implies that points pressure is linked to expenditures on points earning items (e.g., clothes made with organic cotton in the H&M example), without which the likelihood to obtain a reward is low, with an expected positive effect on sales. ...
... These consumers have a stronger motivational attachment to the campaign (that is, an interest in the reward), and possibly stronger preferences for the brand of the retailer, as they appeared to have stronger baseline behavioral loyalty. The initial collection of points may have motivated this group of consumers to engage with the promotion by collecting more points ( Kivetz, Urminsky, and Zheng 2006 ); while the presence of a non-linear pricing schedule for rewards may have further motivated the collection of points to reduce the monetary cost of the reward. At the same time, the presence of points may have also motivated some individuals to redeem a reward to avoid losing points i.e. "points loss aversion"; or avoid wasting the effort placed in collecting points (sunk costs). ...
... The first is goal attainment: Businesses benefit from customer retention when customers believe their goals have been met (Degbey, 2015; Hennig-Thurau and Klee, 1997). According to Kivetz et al. (2006), client retention depends on how far away the customer started from the goal and how much progress they felt they had made. Customers invest more financial and non-financial resources in the company as they approach near to receiving a reward, which boosts retention and subsequent CE behaviour (Kivetz et al., 2006). ...
... According to Kivetz et al. (2006), client retention depends on how far away the customer started from the goal and how much progress they felt they had made. Customers invest more financial and non-financial resources in the company as they approach near to receiving a reward, which boosts retention and subsequent CE behaviour (Kivetz et al., 2006). These findings have been confirmed in settings that require paid membership, such museums and educational websites (Bhattacharya, 1998). ...
The Ed-tech industry has been recently playing a key role in the education sector since the start of pandemic. Still there indeed a lot of room for growth and advancement in the companies' operations to gain successful retention of customers and also creating strong brand image among the users. The idea behind the study is to understand the significant reasons behind troubled customer retention procedure in the Ed-Tech industry with special reference to Ekalavya Learning app and provide necessary suggestions for its improvement. The study also focuses on ways to engage users and tips for making customer stay interested in the app. The study also looks keenly into the concept of customer involvement in the services and the product the company is offering and sees the point of view of customers regarding the company's functionalities and operations. To create an impactful study, questionnaires was distributed to the target population. Statistical tools like SEM, Karl Pearson's coefficient correlation have been used to prove certain situations in the study. The results focuses on creating a space for customer's effective involvement and efficient strategies to be implemented for their engagement in the company's daily operations.
... It contributes to the goal-gradient effect: individuals' heightened effort as they near achieving a goal (Brown & Lahey, 2015;Dai & Zhang, 2019;Hull, 1932;Koo & Fishbach, 2012;Wadhwa & Kim, 2015). For instance, shoppers enrolled in a loyalty program made more frequent purchases closer to receiving their reward (Kivetz et al., 2006). ...
... These findings also complement goal-gradient research by exploring the negative consequence of approaching the end of a goal. The eagerness to finish a goal that sometimes leads to excitement and effort investment (Brown & Lahey, 2015;Dai & Zhang, 2019;Hull, 1932;Kivetz et al., 2006;Koo & Fishbach, 2012;Wadhwa & Kim, 2015) can also lead people to feel worse when they cannot accelerate goal attainment. Although goal-gradient research explores the positive effects of proximity to a goal and the desire for closure it engenders, the present research highlights the downside of seeking closure closer to reaching a goal. ...
Waiting is ubiquitous yet painful. We find that the discomfort of waiting intensifies as the wait draws closer to its end. Using longitudinal studies that measured impatience for real-world events, we documented greater impatience closer to learning the results of the 2020 U.S. presidential election (Study 1), receiving the first COVID-19 vaccine (Study 2), and boarding a bus (Study 3). Follow-up experiments found that a desire for closure underlies this effect, and that impatience increases at the end of the wait controlling for how long people have already been waiting (Supplemental Studies 1–4). These findings suggest that the distress of waiting escalates when the wait is almost over.
... Indeed, research on the goal gradient effect documented that people work harder when closer to finishing a goal (A. L. Brown & Lahey, 2015;Hull, 1932;Kivetz et al., 2006;Koo & Fishbach, 2012;Wadhwa & Kim, 2015). They are more eager to complete the last step than any step before it. ...
... Indeed, one reason why people may work harder when closer to finishing a goal (i.e., the goal gradient effect) is because they have a stronger desire for goal closure (A. L. Brown & Lahey, 2015;Hull, 1932;Kivetz et al., 2006;Koo & Fishbach, 2012;Wadhwa & Kim, 2015). Yet, the desire for closure has a unique effect on the preference for earlier costs (or the choice to work more sooner instead of less later), which is a substantially different construct from general motivation. ...
We explore whether the desire to achieve psychological closure on a goal creates impatience. If so, people should choose an earlier (vs. later) option, even when it does not deliver a reward. For example, they may prefer to pay money or complete work earlier rather than later. A choice to incur earlier costs seems to violate the preference for positive discounting (indeed, it may appear like negative time discounting), unless people value earlier goal closure. Across seven studies, we consistently find that people preferred to pay more money sooner over less money later (Study 1) and complete more work sooner over less work later (Studies 2–5) more when they had a stronger desire for goal closure, such as when the sooner option allowed them to achieve goal closure and when the goal would otherwise linger on their minds (compared to when it would not). The implications of goal closure extend to impatience for gains (Studies 6–7), as people preferred less money sooner (vs. more later) when it allowed them to achieve goal closure. These findings suggest that the desire to achieve goal closure is an important aspect of time preferences. Taking this desire into account can explain marketplace anomalies and inform interventions to reduce impatience.
... Nonetheless, researchers have inquired into the reward redemption mechanism only in relation to shortterm RPs in which members are given a limited time to reach a threshold and redeem a reward (i.e., buy 10 cups of coffee and get a cup free). Studies have explored the interrelationship between reward points and customer behaviors, which are represented as "points pressure mechanisms" [28] and "rewarded-behavior mechanisms" [51]. Kivetz et al. [28] used goal-gradient theory to illustrate that customers conduct themselves in a forwardlooking manner and tend to purchase more frequently as they anticipate that they are closer to redeeming a reward. ...
... Studies have explored the interrelationship between reward points and customer behaviors, which are represented as "points pressure mechanisms" [28] and "rewarded-behavior mechanisms" [51]. Kivetz et al. [28] used goal-gradient theory to illustrate that customers conduct themselves in a forwardlooking manner and tend to purchase more frequently as they anticipate that they are closer to redeeming a reward. Taylor and Neslin [51] argued that reward redemption reinforces positive learning among customers by linking repurchases to rewards and ultimately increasing subsequent purchases. ...
... Metrics like choice, speed, performance, or perseverance used to pursue a goal capture the goal congruence of behavior and can therefore be used to gauge how motivated someone is to pursue the goal (Touré-Tillery & Fishbach, 2014). Behavioral measurements of speed include how quickly a person completes a task or transitions from one task to the next (Kivetz et al., 2006). ...
English is the language that become a worldwide language to use and many individuals from other countries utilize it for communication. Motivation to study English has been identified as the most essential factor influencing students' learning outcomes. The current study used a quantitative methodology and aimed to determine the motivation levels of students studying English as a foreign language at a university in Kampong Cham province. Following permission from school principals and English teachers, 152 students completed the questionnaire. The findings indicate that students in the study situation were driven to learn English more intrinsically than extrinsically. There are significant differences in perception between male and female students. The combination of intrinsic and extrinsic motives suggested that students are somewhat motivated to study English. Because the survey study was conducted on a small scale, a larger sample size and other educational institutions around Cambodia should be used in future studies. Qualitative and mixed-method designs are also strongly encouraged.
... Par exemple, en utilisant l'effet du « Goal-Gradient », on pourrait intégrer une barre de progression visuelle qui s'accélère à mesure que l'apprenant avance dans le cours. Ceci encouragerait une complétion plus rapide et plus efficace des tâches d'apprentissage, en capitalisant sur la tendance humaine à travailler plus rapidement lorsqu'un objectif est proche(Kivetz, Urminsky & Zheng, 2006).De plus, l'effet « Aesthetic-Usability » nous enseigne que des designs esthétiquement agréables sont souvent perçus comme plus utilisables, même s'ils ont des problèmes mineurs de convivialité. Intégrer cette idée dans la conception de notre plateforme pourrait inclure le choix de schémas de couleurs apaisants et de typographies lisibles qui améliorent non seulement l'expérience esthétique, mais aussi la tolérance de l'utilisateur à des problèmes mineurs de convivialité(Kurosu & Kashimura, 1995).Cette réflexion souligne l'importance d'une présentation simplifiée et ciblée du contenu, respectant la capacité cognitive de l'apprenant et facilitant une expérience intuitive et efficace. ...
UX design, merging aesthetics and pedagogical efficiency, is crucial in the development of online learning platforms. Drawing from my experiences at Matha io and JobTeaser, this thesis explores how the incorporation of UX design, grounded in cognitive load theory, impacts learner engagement. I argue that user-centered design and cognitive psychology are essential to the advancement of modern education. The aim of this thesis is to contribute to the improvement of pedagogical design methods, focusing on intuitive and effective learner interaction.
... For example, Milyavskaya et al. (2014) showed that goals in domains that satisfy basic psychological needs are higher in the goal dimension selfconcordance. There are also many reasons why goal dimensions may vary over time: First, variations in some goal dimensions (e.g., commitment) may reflect typical temporal patterns of motivation over time, including high motivation at the beginning of goal pursuit, decreasing motivation in the middle and increasing motivation again as deadlines or goal attainment approach (referred to as "goal gradient," "slacking in the middle," and "goal looms larger-effect"; Förster et al., 2001;Hull, 1932;Kivetz et al., 2006;Touré-Tillery & Fishbach, 2012). Second, variation in some goal dimensions (e.g., progress) may reflect the fact that goal pursuit rarely unfolds in perfect accordance with expectations at the time of goal setting and that obstacles may stand in the way of goal attainment (Wrosch et al., 2003). ...
When pursuing personal goals, individuals may experience fluctuations in goal-related dimensions like commitment and enjoyment. We present an approach to describe, analyze, and explain such within-person variability. In Part I, we determined to which extent within-person variability over time contributes to the total variability in goal dimensions, including between-person and between-goal variability. We observed strongest variability between goals, followed by variability over time, and between persons. In Part II, we estimated the within-person variability for each goal dimension using the indices dispersion (individual standard deviation), instability (root of squared successive differences), and inertia (autoregressive parameter). Dispersion was above-average for goal facilitation and progress and below-average for external motivation, value, and demand. Instability was above-average for facilitation and progress and below-average for commitment and demand. Inertia was above-average for facilitation and below-average for progress. Highlighting the relevance of self-regulatory competencies, we found that, when excluding outliers with extremely high variability, people with higher trait self-control, higher conscientiousness, and lower neuroticism showed lower variability. Both higher levels of trait self-control and conscientiousness predicted lower instability and higher inertia of goal dimensions. Conversely, higher neuroticism predicted higher dispersion and instability. We discuss these findings in the context of the Cybernetic Big Five theory.
... Následne respondenti odpovedali na tieto otázky, pre každý vývinový míľnik samostatne (Gollwitzer, 1990;Kivetz et al., 2006) Tento míľnik bol cieľom pre takmer 30 % mladých vo veku 19-30 rokov (častejšie realizovaným než odkladaným). O tomto míľniku neuvažovala takmer štvrtina mladých a takmer polovica tento cieľ už dosiahla (tab. ...
Exploring the developmental goals of young adults in the context of selected sociodemographic factors, social pressure and time horizon Aim. Emerging adulthood represents an important life period of transition from childhood to a new stage of adulthood by assuming the achievement of selected normative developmental milestones/goals (1. completing formal education; 2. starting a permanent job; 3. independent living; 4. finding a permanent partner; 5. started cohabitation and 6. birth of a child). The aim of the study was to examine the subjective perception of achieving these expected developmental milestones, perceived social pressure and time horizon for their achievement.Method. Data were collected through a questionnaire battery on a representative sample of 899 Slovak young adults aged 19–30 years.Results. The findings showed that the effort to reach developmental milestones among young people is different. While for half and more the goals related to finishing formal education, finding a permanent partner and starting work were ones they had already achieved, on the other hand, milestones related to partner cohabitation and the birth of a child were out of date for more than a third to half of the young people. The most common goals of todayʼs young people were milestones related to independent living and the birth of a child. Taking a closer look specifically only at those who declared that developmental milestones were their goals, the authors found that neither demographic characteristics (gender and age) nor perceived social pressure were key factors in when young people want to achieve the expected milestones. Thus, the first perceived milestones/goals included completion of formal education (however, with the exception of those, who postpone them), starting a job, finding a partner and living independently. However, this is underestimated due to the later departure of young people from their parentsʼ home, according to official statistics. The later milestones/goals included cohabitation and the birth of a child. Cieľ. Vynárajúca sa dospelosť predstavuje významné životné obdobie prechodu z detstva do novej etapy dospelosti tým, že sa predpokladá dosahovanie vybraných normatívnych vývinových míľnikov/cieľov (1. ukončenie formálneho vzdelávania; 2. nástup do trvalej práce; 3. samostatné bývanie; 4. nájdenie si trvalého partnera; 5. začaté partnerské spolužitie a 6. narodenie dieťaťa). Cieľom štúdie bolo preskúmať subjektívne vnímanie dosahovania týchto očakávaných vývinových míľnikov, vnímaný sociálny tlak a časové horizonty ich dosiahnutia. Metóda. Dáta boli zisťované prostredníctvom dotazníkovej batérie na reprezentatívnom výbere 899 slovenských mladých vo veku 19–30 rokov. Výsledky. Zistenia ukázali, že snaha dosahovať vývinové míľniky u mladých je rozdielna. Kým pre polovicu a viac boli ciele týkajúce sa ukončenia formálneho vzdelávania, nájdenia si trvalého partnera a nástup do práce tými, ktoré už dosiahli, na opačnej strane boli míľniky týkajúce sa partnerského spolužitia a narodenia dieťaťa, ktoré boli pre viac ako tretinu až polovicu mladých neaktuálne. Najčastejšími cieľmi súčasných mladých boli míľniky týkajúce sa samostatného bývania a narodenia dieťaťa. Následne autorky špecificky u tých, ktorí deklarovali, že jednotlivé míľniky sú ich cieľmi, zistili, že ani demografické charakteristiky (rod a vek), ani vnímaný sociálny tlak neboli kľúčovými faktormi časových horizontov, kedy chcú mladí očakávané míľniky dosiahnuť. K najskôr vnímaným míľnikom/cieľom patrili ukončenie formálneho vzdelávania (avšak s výnimkou u odkladajúcich), nástup do práce, nájdenie si partnera a samostatné bývanie. Práve to je však podhodnotené vzhľadom na neskoršie odchádzanie mladých z rodičovského domu podľa oficiálnych štatistík. K tým neskorším míľnikom/cieľom patrili partnerské spolužitie a narodenie dieťaťa.
... Therefore, when purchasing utilitarian products, consumers tend to be more rational compared to when purchasing hedonic products [2,6,11,17,29]. Due to the nature of hedonic products, consumers often struggle to rationalize their purchase intentions [20]. Zheng and Kivetz [30] noted that to rationalize their consumption of hedonic products, consumers rely more on external cues, such as promotions. ...
... We found evidence for completion effects in all five samples that manipulated completion. These completion effects are consistent with the goal gradient hypothesis, where motivation to achieve the goal increases as we get closer to the goal (Heath, Larrick, and Wu 1999;Hull 1932;Kivetz, Urminsky, and Zheng 2006;Ting 2011). Even when participants were aware of an alternative project that could be completed in the same amount of time (Study 3), participants were affected by sunk time and completion. ...
Five studies involving seven samples were conducted to examine the effects of sunk time in progress decisions. Previous research on sunk time in progress decisions has failed to control for completion effects. Studies 1a and 1b found strong evidence for completion effects and weaker effects for sunk time effects on probability of continuing. In Studies 2a and 2b, we expanded our sunk time scenarios to use multiple types. We found evidence for sunk time and completion effects on probability of continuing. An additional analysis, however, found that the sunk time effect was larger when the progress decision involved a goal focused on the accomplishment of a project (e.g., writing a paper for class), as opposed to a goal focused on enjoyment (e.g., watching a television show). Study 3 found that both sunk time and completion effects were present in progress decisions focused on the accomplishment of a project. These effects were present even when participants were informed that there was sufficient time to complete an alternative project. Study 4 failed to find a sunk time effect in a behavioral study, and Study 5 replicated Study 4 using a vignette format. Overall, these results provide some evidence of sunk time effects in progress decisions, but the effect appears to be small and may be due, at least partially, to completion effects.
... From the perspective of the creator, the ability of the creator to manage Web 2.0 and the willingness to open up to crowd opinion to expand their skills have a positive impact on the success of crowdfunding (Nucciarelli et al., 2017). From the perspective of supporters, the gender of supporters (Mollick, 2014), the distance between supporter goals and project funding (Kivetz et al., 2006;Kuppuswamy & Bayus, 2017), prosocial motivation to support the project (Lin & Boh, 2020), the social capital of the project creator (Colombo et al., 2015) will affect the success rate of crowdfunding. From the perspective of the platform, the number of comments, comment sentiment, response length and response speed in the crowdfunding platform are also positively correlated with crowdfunding (Wang et al., 2018). ...
The technology sector is one of the most popular sectors for entrepreneurship. This paper investigates the success factors of fundraising in the technology sector. We argue that text elements of the project's description have a significant effect of the project success. We used text mining to extract and analyze 17,733 crowdfunding projects over an 11‐year period between 2009 and 2019 from the Kickstarter platform. We identified 28 textual elements and examined whether they affect project success as measured by three different operationalizations. Most of the textual elements were found to have a significant effect on the project's success. The findings provide valuable insights and highlight substantial opportunities for crowdfunding in the context of technology.
... Notable research examines how consumers perceive combined-currency prices relative to single-currency prices (Drèze & Nunes, 2004). Other research in this F I G U R E 1 Literature review and current research (Drèze & Nunes, 2009;Kivetz et al., 2006;Liu, 2007;Zhang & Breugelmans, 2012;Zhang & Gao, 2016). category deals with the question of whether to spend points or not. ...
The central questions answered in this research are, “For what, and when, do consumers prefer to spend loyalty points over money?” We use construal level theory (CLT) to theorize that loyalty (or reward) points are perceived abstractly while money is perceived concretely, and this impacts spending preferences. We find that consumers prefer to spend loyalty points (vs. money) on high desirability‐low feasibility (vs. low desirability‐high feasibility) consumption items. The same pattern also persists when the items that vary on desirability and feasibility are equivalently priced. Second, we show that the construal‐level matching phenomenon influences temporal decisions such that consumers prefer to spend points (vs. money) for items that are available later (vs. now). Third, the moderating effect of category type (experiential vs. material) is reported. Finally, we demonstrate two managerial applications that are reported in the Web Appendix. We show that managers may influence how consumers spend loyalty points (a) by altering the concreteness of the decision context, and (b) by manipulating the nature of loyalty points.
... When a high number of supporters are present, it signals a product's high quality (Burtch et al., 2013;Herzenstein et al., 2011;Liu et al., 2015;Wehnert et al., 2019) and it increases the extrinsic motivation regarding the desire for recognition from the community. Therefore, we propose: Generally speaking, individuals tend to increase their efforts toward reaching a goal the closer they are to reaching the goal (Kivetz et al., 2006). Kuppuswamy and Bayus (2017) and Li and Wang (2019) demonstrated that for timelimited crowdfunding campaigns, the support significantly increases as the campaign nears its target goal, and when a goal is met, the support decreases drastically. ...
Subscription-based crowdfunding platforms emerged as novel digital platforms that offer creators the possibility of financial independence. They differ significantly from traditional time-limited crowdfunding approaches by utilizing recurring payments and enabling a creator-centric rather than campaign-centric funding approach. We built upon previous research on individuals’ motivation to support crowdfunding campaigns, and utilizing self-determination theory, our study explores which subscription-based crowdfunding campaign characteristics influence individuals’ motivation to support them. We use a two-method approach by analyzing individual pledge data from a subscription-based crowdfunding platform and conducting a discrete choice experiment. Our results show that having a high number of previous supporters increases potential supporters’ willingness to pay, while a campaign’s current recurring income and the hiding of this piece of information decrease it. We could also identify a u-shaped effect of campaigns’ goal proximity on willingness to pay. We discuss the theoretical and practical contributions of our research and provide an overview of potential future research directions.
... The Goal Gradient Hypothesis (GGH; Hull, 1932;Kivetz et al., 2006;Nunes and Drèze, 2006) predicts that motivation to pursue a goal increases as one moves closer to the goal. However, when a goal is time-bound and time is a continually depleting resource, does motivation to pursue the goal change and if so, does it increase or decrease? ...
We examine how motivation to continue pursuing a goal (e.g., lose 20 pounds in 10 weeks) is impacted not only by the extent of the goal progress to date but also by the amount of the time remaining for goal completion, an aspect unique to time-bound goals. We show that the effect of goal progress on motivation to keep pursuing the goal is accentuated when the time remaining for completing a time-bound goal is scarce versus abundant. We also find that this accentuation is stronger for all-or-nothing versus flexible goals. Our research contributes to the understanding of goal progress by presenting resource (time) scarcity’s motivational influence on pursuing time-bound goals.
... Other studies corroborate the above results though in an indirect manner. For example, studies have shown that as distance to a goal decreases, people engage in more thoughts about whether and how beneficiaries might be able to make effective use of donations (e.g., Kivetz et al., 2006;Touré-Tillery and Fishbach, 2011). Tsiros and Irmak (2020) show that deliberations of outcome efficacy can enhance donors' self-perceptions of personal contribution, which are highest when donation limits seem reachable (i.e., high progress toward donation goal in our context). ...
Although textual and facial emotion expressions in prosocial appeals have been studied separately in past research, there has been little work on the misalignment (compared to alignment) between them. Using a multi-method approach comprising experiments and panel data of 6,098 crowdfunding projects from Gofundme, we investigate how emotions expressed in the cover image and the project description interact to increase potential donors’ engagement as measured by metrics relevant to the platform, i.e., donation amount per donor. More specifically, we focus on the misalignment (vs. alignment) between happy and sad facial expressions in images and the positive and negative emotions in the project description. Our empirical analysis shows that misalignment scenarios have a bigger positive impact on the donor’s contributed amount, compared to alignment scenarios. We also show that such a relative impact is heterogeneous and differs based on expressed urgency, beneficiary age, and progress towards donation goal. We make a theoretical contribution via assessing the extent of cognitive processing in misalignment vs alignment cases. We propose situations with a tradeoff such that the extent of cognitive processing of multimodal information content can be reduced due to simultaneous activation of affective processing. Our research provides strategic recommendations for platforms to increase donors’ engagement and platform revenue management.
Purpose
This study aims to investigate the moderating effects of individual social engagement on the effectiveness of freemium strategies in digital content platforms.
Design/methodology/approach
This study involved conducting a randomized field experiment with 74,758 consumers on a prominent e-book platform in China, comparing the effects of offering the first 50 chapters for free against no free content. Additionally, a causal random forest machine learning algorithm was applied to analyze data and optimize strategies based on individual social engagement levels.
Findings
This study indicates freemium strategies on digital content platforms can increase consumer willingness to pay but may reduce social community participation. These effects are moderated by consumers' prior social engagement, with excessive interaction leading to diminishing returns.
Practical implications
The study offers actionable insights for digital content managers, showing how tailored freemium strategies can effectively balance consumer engagement and revenue generation. The findings suggest that platforms can significantly enhance profitability by moderating free content offerings based on detailed analysis of consumer engagement histories.
Originality/value
This study enhances the understanding of freemium strategies by showcasing their dual impact on consumer willingness to pay and social engagement, and detailing the complex, non-linear effects of individual social engagement, which challenges the traditional linear assumptions in existing literature. Additionally, it provides insights for implementing mixed marketing strategies on digital platforms, where multiple strategies often interact, guiding the effective management of these complexities.
Humans frequently engage in mental time travel, reflecting on the past and anticipating the future. Although these processes may seem similar, research documents systematic differences between retrospection and prospection. We propose a conceptual framework to organize and explain these differences based on three axiomatic temporal asymmetries: The past occurs before the future; the past is more certain than the future; and the past is less controllable than the future. People’s experience with these axiomatic differences is internalized and overgeneralized to shape mental representations of the past and future. Our review shows that people generally prioritize prospection over retrospection, attending more to the future than the past and reacting more intensely to future events than to past events. We consider potential moderators of and constraints on the generality of prioritizing prospection. We explore the implications of these temporal asymmetries, emphasizing their theoretical and practical significance.
Public Abstract
While daily life centers on the present, people often reflect on the past and anticipate the future. But which direction of mental time travel—backward or forward—has more influence? We identify three key differences that shape how people engage with the past and future: time flows from past to future, the future is more uncertain, and people have more control over the future. These differences affect the frequency, intensity, and nature of thoughts and feelings, leading to predictable biases in how we mentally represent and emotionally engage with events over time. Because focusing on the future often provides greater benefits, people tend to prioritize prospection over retrospection in everyday life.
Piecewise-linear reward schemes are very common in workplaces; by definition, they divide the set of possible performance levels into disjoint intervals that could have psychological value to workers. When these schemes take the form of lump-sum bonuses, any psychological rewards associated with attaining a performance interval are hard to distinguish from material ones because both material and psychological incentives predict bunching at the output needed to earn the bonus. To disentangle these effects, this paper studies a common but understudied class of piecewise-linear pay—accelerators—in which the mechanisms’ predictions conflict. Using the distributions of daily sales in 103 small retail teams, we find that daily sales bunch at accelerators, which is inconsistent with models in which only material rewards matter. Combining simple theoretical models, institutional evidence, and heterogeneity analyses, we argue that this unexpected bunching results from teams’ decisions to use the convenient, salient kink points as shared goals, which yield symbolic utility to their members when the points are attained.
This paper was accepted by Lamar Pierce, behavioral economics and decision analysis.
Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01661 .
Charitable donations can be influenced by the level of progress of a cause towards its fundraising goal. The current work demonstrates how jointly considering more than one charitable cause along with their goal progress information shifts consumers’ donation decisions. When charitable causes are evaluated jointly (vs. separately), the comparison makes relative need for help more salient and easier to evaluate, leading to greater giving to the cause farther from its goal. A multi-method investigation, involving six pre-registered experimental studies, seven supplemental studies, and a large secondary dataset with over 10,000 projects from a micro-crowdfunding platform, provides evidence for this phenomenon and demonstrates that it is robust to variations in the type of cause, number of projects, and the donor being able to personally complete the goal. Conversely, the effect is eliminated or reversed when charities are evaluated separately (as relative need for help is less salient), when the gap between charities is smaller (as perceptions of relative need for help are diminished), or when for-profit businesses are evaluated (as the context does not heighten sensitivity to need). This work contributes to research on goal progress and evaluation mode and has implications for charitable giving in comparative contexts like crowdfunding.
Targeted advertising has been extensively researched and utilized, yet it remains a challenge for the majority of small and medium-sized enterprises (SMEs) to effectively implement. To tackle this issue, e-commerce platforms have established member-oriented marketing windows that attract high-quality merchants and consumers, creating new opportunities for SMEs. Unlike traditional Mass Advertising (MA) in public windows, SMEs can achieve Targeted Advertising (TA) marketing to member and non-member groups separately by joining the membership marketing system. Two typical advertising cost-bearing structures are included for the platform’s membership marketing system: the Platform-Bearing-Cost (PBC) and the Merchant-Bearing-Cost (MBC) mechanisms. The results show that, regardless of the cost-bearing mechanism, the narrow fee gap between the two marketing windows leads to a higher advertising level and advertising investment for members. Moreover, we identify the criteria under which the merchant adopts TA: a limited cross-purchase for the members in public windows. Furthermore, a sufficiently low members’ cross-purchase coefficient in public windows contributes to a TA win-win outcome for the platform and the merchant. Nevertheless, the platform does not always benefit from the merchant’s adoption of TA, which has inspired us to refine the platform’s membership marketing system further. Two viable options are proposed for consideration: discount adjustment and product screening. The former, which is a strategic adjustment of member-only discounts, is designed to induce merchants to adopt the ad format that aligns with the platform’s expectations. The latter, which is a set of rigorous entry criteria, is intended to permit only those products that are in high demand to participate.
Purpose
This paper develops an evidence-based conceptual framework for exploring the applicability of choice architecture in business relationships.
Design/methodology/approach
Empirical studies of choice architecture in various fields are systematically reviewed to identify choice architecture techniques; major resulting categories of techniques are then discussed for applicability to business relationship contexts, and avenues for research are outlined.
Findings
Managerial decision-making is potentially influenced by changes to choice contexts that (1 provide additional information from outside the choice context, (2) facilitate a particular way of comparing options, (3) present options in new ways, (4) rework the choice set, e.g. by adding options and (5) create internal states that push toward a target choice.
Originality/value
The paper introduces the concept of choice architecture to business relationships. It develops a taxonomy of choice architecture techniques to guide the exploration of choice architecture effects in business relationships.
Background Failures to obtain a desired reward, such as losing money in gambling, can lead to frustration. In gambling, this frustration has been shown to take the form of faster responses after losses compared with wins and non-gambling trials. In addition, reward omission or blockage can lead to more forceful responses. Yu and colleagues (2014) showed that the proximity to a reward and the effort already expended to acquire the reward increased participants’ response force and their retrospective self-reported frustration when the reward was blocked. Methods In this study, we attempted to replicate the findings of Yu and colleagues (2014) using the same experimental procedure. In each schedule, participants (N = 32) needed to complete an arrow direction task for varying numbers of times to win a reward but could be blocked at any stage. The response time (RT) and force of confirming the outcomes were used as indicators of ‘frustration’. In addition, to obtain a more real-time and objective measure of (negative) emotion, we measured facial electromyographic (EMG) activity over the corrugator supercilii (frowning muscle) and the zygomaticus (smiling muscle). Results Due to technical problems, our data on response force were invalid. In line with the original study, both goal proximity and exerted effort increased participants’ self-reported motivation in the task and frustration after being blocked. An exploratory analysis showed that participants were slower in confirming an outcome when they were blocked closer to the reward, while exerted effort did not influence confirm RT. These RT data were consistent with self-reported surprise ratings, suggesting an orienting response. In the facial EMG data, we observed no difference between wins and losses in activity over the corrugator or the zygomaticus. Conclusion Taken together, these data suggest that reward blockage does not necessarily lead to behavioral or psychophysiological expressions of negative emotions such as frustration.
Purpose
The purpose of this paper is to investigate the effect of reward redemption programs on donation amount, donation percentage and donation intention in the context of a bank credit card.
Design/methodology/approach
A 2 × 2 × 3 experiment is implemented with 1,070 consumers accessing a national US-based sample with a small compensation. The authors use general linear model to test the proposed hypotheses.
Findings
The findings show the main effects of reward types, limited-time message and value of reward redemptions on the percentage of donations and overall donation intention to charity. The type of reward (cash/points) is found to interact with the limited-time message and with the value of reward redemptions.
Originality/value
No prior studies have addressed the relationship between credit card redemption rewards and scarcity messages in the donation context. The study contributes to the understanding of the effectiveness of credit card redemption rewards with scarcity message in improving a consumer’s donation intention.
Despite the increasing use of robots in marketing to improve consumers’ perceptions of brand image, relatively little is known about how the positioning of robots (i.e., as either partners or servants) influences consumer evaluations of brands employing service robots. In this paper, we examine the effect of robot role positioning on consumers in four studies within the context of time-honored brands. Study 1 demonstrates that brands using robots positioned as partners (vs. servants) will enhance consumers’ brand evaluations. Study 2 shows that psychological distance is a mechanism underlying the effect between robot role positioning and consumers’ brand evaluations. Studies 3 and 4 consider power distance belief (PDB) and service type to explore the premise’s boundary and find that these factors moderate the effect of robot role positioning on consumer brand evaluations. The findings offer theoretical and managerial implications for human-robot interaction in marketing.
People often decide whether to invest scarce resources—such as time, money, or energy—to improve their chances of a positive outcome. For example, a doctor might decide whether to utilize scarce medicine to improve a patient’s chances of recovery, or a student might decide whether to study a few additional hours to increase their chances of passing an exam. We conducted 11 studies ( N = 5,342 adults) and found evidence that people behave as if they focus on the relative reduction in bad outcomes caused by such improvements. As a consequence, the same improvements (e.g., 10-percentage-point improvements) are valued very differently depending on whether one’s initial chances of success are high or low. This focus on the relative reduction of bad outcomes drives risk preferences that violate normative standards (Studies 1a–1g and 2a), is amplified when decisions become more consequential (Study 2b), and leads even experienced professionals to make suboptimal decisions (Study 3).
Reward programs offer rewards, and with further progression toward these rewards, customers become more motivated. This acceleration is called a reward gradient. This study proposes prospect theory as the underlying mechanism of the reward gradient and suggests a nonlinear relationship between motivation and progress level (low vs. middle vs. high). A numerical simulation based on the mathematical model and experiments were conducted to see how the expected values of rewards can change as progress is made, and how this further affects motivation. The results identified a stronger acceleration in the expected value after reaching a middle point of the reward achievement, which is due to a larger deviation in the loss value than the gain value. These findings can help restaurants and tourism companies implement a dynamic perspective in reward programs for enhancing customers’ reward gradient behaviors.
People sick with infectious illnesses face negative social outcomes, like exclusion, and may take steps to conceal their illnesses from others. In 10 studies of past, current, and projected illness, we examined the prevalence and predictors of infection concealment in adult samples of U.S. university students, health-care employees, and online crowdsourced workers (total N = 4,110). About 75% reported concealing illness in interpersonal interactions, possibly placing others in harm’s way. Concealment motives were largely social (e.g., wanting to attend events like parties) and achievement oriented (e.g., completing work objectives). Disease characteristics, including potential harm and illness immediacy, also influenced concealment decisions. People imagining harmful (vs. mild) infections concealed illness less frequently, whereas participants who were actually sick concealed frequently regardless of illness harm, suggesting state-specific biases underlying concealment decisions. Disease concealment appears to be a widely prevalent behavior by which concealers trade off risks to others in favor of their own goals, creating potentially important public-health consequences.
Following trends in entertainment streaming services, online educational platforms are increasingly offering users flexible “on-demand” content options. It is important to understand how the timing of content release affects learning behaviors and firm revenue drivers. The current research studies over 67,000 users taking a marketing course before vs. after a natural experiment where the platform switched the course from a scheduled weekly-release format to an on-demand format with all content immediately available. The switch to on-demand positively impacted short-term firm revenue by increasing the number and proportion of certificate-paying users, suggesting that on-demand content can attract a broader set of consumers who value flexibility. On the downside, the switch resulted in users exhibiting lower lecture completion rates and quiz performance, and taking fewer additional business courses on the platform, representing a long-term cost. The results were robust to propensity score matching and stratification. The analyses also revealed that on-demand content enabled learning patterns that deviated from a standard evenly-paced schedule, including “strategic” binge learning and stretching out engagement past the recommended course period. Thus, while on-demand formats can boost revenues by bringing in more paying users, managers must consider new strategies for maintaining performance and engagement levels within these environments.
Models of adaptive calibration provide an overarching theoretical framework for understanding the developmental roots of psychological and behavioral outcomes in adulthood. An adaptive calibration framework was used to examine an important dimension of motivation: goal timing. Across two studies, we saw mixed support for the hypothesis that unpredictability experienced in childhood would be negatively associated with the time horizons people use to set their goals, such that people who reported experiencing more unpredictability in their childhood tended to set goals on relatively shorter time horizons. The association was observed based on independent ratings of goal timing, but not based on participants’ self-reported ratings of goal timing, and was statistically mediated by people’s tendency to consider the short- versus long-term future consequences of their actions. These studies isolate a key component of childhood adversity—unpredictability—potentially underlying the time horizons people use to set, prioritize, and pursue their goals.
The cognitivist paradigm has dominated the past 50 years of consumer research. Cognitivist theories have provided extensive insights into pre‐consumption behaviors (i.e., information gathering, attitude formation, product choice, and product purchase) and the processes that support these behaviors (i.e., attitudes, persuasion, information processing, memory, knowledge, and choice processes). Yet, the cognitivist paradigm has limitations, especially when it comes to addressing detrimental consumption, over‐consumption, and perverse incentives in consumption systems. To address these issues, we discuss how a behaviorist paradigm can be used to identify more efficient and effective interventions for societal ills. The behaviorist perspective emphasizes that an alteration of the consumption environment can influence the ease of expressing a behavior and the rewards/punishments associated with this expression. Hence, behaviorism is useful in identifying and implementing intelligent nudges.
This chapter provides a comprehensive overview of the cues that exist in a retail environment and expands the current knowledge of sensory marketing and its multifaceted nature. Different types of cues are introduced, including ambient, design, social, haptic, merchandise-related and pricing-related cues. While ambient, design and social cues are primarily related to the general atmosphere of the store, haptic, merchandise-related and pricing-related cues are linked more directly to the moment of choice. The chapter sheds light on these various cues and their effects through analysis of an extensive range of academic research. Taken together, the chapter demonstrates that the store environment can be seen as a bundle of cues that has a capacity to affect our daily choices.
Marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching. Though the approach is useful, it typically ignores the destabilizing role of marketing variables (e.g., price) in switching behavior. The authors propose a flexible choice model that partitions the market into consumer segments differing in both brand preference and price sensitivity. The result is a unified description of market structure that links the pattern of brand switching to the magnitudes of own- and cross-price elasticities. The approach is applied in a study of competition between national brands and private labels in one product category.
A medium-for example, points or money-is a token people receive as the immediate reward of their effort. It has no value in and of itself, but it can be traded for a desired outcome. Experiments demonstrate that, when people are faced with options entailing different outcomes, the presence of a medium can alter what option they choose. This effect occurs because the medium presents an illusion of advantage to an otherwise not so advantageous option, an illusion of certainty to an otherwise uncertain option, or an illusion of linearity to an otherwise concave effort-outcome return relationship. This work has implications for how points influence consumer choice and how money influences human behavior.
One of the mysteries of store-level scanner data modeling is the lack of a dip in sales in the week(s) following a promotion. Researchers expect to find a postpromotion dip because analyses of household scanner panel data indicate that consumers tend to accelerate their purchases in response to a promotion -- that is, they buy earlier and/or purchase larger quantities than they would in the absence of a promotion. Thus, one should also find a pronounced dip in store-level sales in the week(s) following a promotion. However, researchers find such dips usually neither at the category nor at the brand level. Several arguments have been proposed for the lack of a postpromotion dip in store-level sales data. These arguments explain why dips may be hidden. Given that dips are difficult to detect by traditional models (and by a visual inspection of the data), we propose models that can account for a multitude of factors which together cause complex pre- and postpromotion dips. We use three alternative distributed lead- and lag structures: an Almon model, an Unrestricted dynamic effects model, and an Exponential decay model. In each model, we include four types of price discounts: without any support, with display-only support, with feature-only support, and with feature and display support. The models are calibrated on store-level scanner data for two product categories: tuna and toilet tissue. We estimate the dip to be between 4 and 25 percent of the current sales effect, which is consistent with household-level studies.
The question of how affect arises and what affect indicates is examined from a feedback-based viewpoint on self-regulation. Using the analogy of action control as the attempt to diminish distance to a goal, a second feedback system is postulated that senses and regulates the rate at which the action-guiding system is functioning. This second system is seen as responsible for affect. Implications of these assertions and issues that arise from them are addressed in the remainder of the article. Several issues relate to the emotion model itself; others concern the relation between negative emotion and disengagement from goals. Relations to 3 other emotion theories are also addressed. The authors conclude that this view on affect is a useful supplement to other theories and that the concept of emotion is easily assimilated to feedback models of self-regulation. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching. Though the approach is useful, it typically ignores the destabilizing role of marketing variables (e.g., price) in switching behavior. The authors propose a flexible choice model that partitions the market into consumer segments differing in both brand preference and price sensitivity. The result is a unified description of market structure that links the pattern of brand switching to the magnitudes of own- and cross-price elasticities. The approach is applied in a study of competition between national brands and private labels in one product category.
Recent work in marketing has drawn on behavioral decision theory to advance the notion that consumers evaluate attributes (and therefore choice alternatives) not only in absolute terms, but as deviations from a reference point. The theory has important substantive and practical implications for the timing and execution of price promotions and other marketing activities.
Choice modelers using scanner panel data have tested for the presence of these “reference effects” in consumer response to an attribute such as price. In applications of the theory of reference-dependent choice (Tversky and Kahneman 1991), some modelers report empirical evidence of loss aversion: When a consumer encounters a price above his or her established reference point (a “loss”), the response is greater than for a price below the reference point (a “gain”). Researchers have gone so far as to suggest that evidence for the so-called reference effect make it an empirical generalization in marketing (e.g., Kalyanaram and Winer 1995, Meyer and Johnson 1995).
It is our contention that the measurement of loss aversion in empirical applications of the reference-dependent choice model is confounded by the presence of unaccounted-for heterogeneity in consumer price responsiveness. Our reasoning is that the kinked price response curve implied by loss aversion is confounded with the slopes of the response curves across segments that are differentially responsive to price. A more price-responsive consumer (with a steeper response function) tends to have a lower price level as a reference point. This consumer faces a larger proportion of prices above his reference point, thus the response curve is steeperin the domain of losses. Similarly, the less price-responsive consumer sees a greater proportion of prices below his reference point, so the response curve is less steep within the domain of gains. As a result, any cross-sectional estimate of loss aversion that does not take this into account will be biased upward—researchers who do not control for heterogeneity in price responsiveness may arrive at incorrect substantive conclusions about the phenomenon. It is interesting to note that in this instance, failure to control for heterogeneity induces a bias in favor of finding an effect, rather than the more typical case of attenuation of the effect toward zero.
We first test our assertion regarding the referencedependent model using scanner panel data on refrigerated orange juice and subsequently extend this analysis to 11 additional product categories. In all cases we find, as predicted, that accounting for price-response heterogeneity leads to lower and frequently nonsignificant estimates of loss aversion. We do, however, find some categories in which the effect does not disappear altogether. We also estimate loss aversion using a “sticker shock” model of brand choice in which the reference prices are brand-specific. In line with the results of the majority of prior literature, we find smaller and insignificant estimates of loss aversion in this model. We show that this is because in the sticker shock model, there is no apparent correlation between the price responsiveness of the consumer and the representation of reference effects as losses or gains. Our findings strongly suggest that loss aversion may not in fact be a universal phenomenon, at least in the context of frequently purchased grocery products.
Based upon a recently developed multiattribute generalization of prospect theory's value function (Tversky and Kahneman 1991), we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points, and that consumers weigh losses from a reference point more than equivalent sized gains (loss aversion). We sketch implications of this model for understanding brand choice.
We develop a multinomial logit formulation of a reference-dependent choice model, calibrating it using scanner data. In addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model, the model's coefficients demonstrate significant loss aversion, as hypothesized.
We also discuss the implications of a reference-dependent view of consumer choice for modeling brand choice, demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics, and examine other implications for competitive strategy.
This article provides the first large scale investigation of the ability of a loyalty programs to alter the normal market patterns of repeat-purchase behaviour. A large loyalty program is evaluated in terms of its ability to generate ‘excess loyalty’ for brands in the program. Panel data were used to develop Dirichlet estimates of expected repeat-purchase loyalty statistics by brand, thus controlling for self-selection effects. The loyalty estimates were compared with the observed market repeat-purchase behaviour. Overall a trend towards a weak level of excess loyalty was observed, although the expected deviation was not consistently observed for all the loyalty program brands. Only two of the six loyalty program participant brands showed excess loyalty. However, these deviations in repeat-purchase loyalty were observed for non-members of the loyalty program as well as members and appear likely to be at least partially the result of other loyalty efforts particular to these brands.
In goal--oriented services, consumers want to get transported from one well--defined state (start) to another (destination) state without much concern for intermediate states. A cost--based evaluation of such services should depend on the total cost associated with the service---i.e., the price and the amount of time taken for completion. In this paper, we demonstrate that the characteristics of the path to the final destination also influence evaluation and choice. Specifically, we show that segments of idle time and travel away from the final destination are seen as obstacles in the progress towards the destination, and hence lower the choice likelihood of the path. Further, we show that the earlier such obstacles occur during the service, the lower is the choice likelihood. We present an analytical model of consumer choice and test its predictions in a series of experiments. Our results show that in choosing between two services that cover the same displacement in the same time (i.e., identical average progress), consumer choice is driven by the perception of progress towards the goal (i.e., by virtual progress). In a final experiment, we show that the effects of virtual progress may outweigh the effects of actual average progress.
An asymmetrically dominated alternative is dominated by one item in the set but not by another. Adding such an alternative to a choice set can increase the probability of choosing the item that dominates it. This result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible.
Consumer choices are often driven by multiple goals (e.g., career and family), each of which if viewed in isolation may appear to suggest conflicting choices. This article examines the effect of initial goal pursuit on consumers' interest in pursuing unrelated or even conflicting goals. Four studies were conducted to test whether perceived goal progress hinders the pursuit of the focal goal. These studies demonstrate that in the course of self-regulation progress along one goal liberates people to pursue inconsistent goals. Furthermore, merely planning to make goal progress in the future may facilitate incongruent choice of immediate action. (c) 2005 by JOURNAL OF CONSUMER RESEARCH, Inc..
Three studies tested the hypothesis that regulatory focus, both as a chronic person variable and as a manipulated situational variable, differentially affects the strength of participants' approach and avoidance strategic motivations as they get closer to the goal. In 2 studies, flexion and extension arm pressure were used as on-line measures of approach and avoidance intensity, respectively. As predicted, the approach gradient was steeper for participants with a promotion focus on aspirations and gains than for participants with a prevention focus on responsibilities and nonlosses, whereas the reverse was true for the avoidance gradient. In a third study, the same pattern of results was found on a persistence measure of motivational strength. Participants with a promotion focus worked longer on anagrams closer to the goal when they were approach means for goal attainment than when they were avoidance means, whereas the reverse was true for participants with a prevention focus.
Construal level theory proposes that temporal distance changes people's responses to future events by changing the way people mentally represent those events. The greater the temporal distance, the more likely are events to be represented in terms of a few abstract features that convey the perceived essence of the events (high-level construals) rather than in terms of more concrete and incidental details of the events (low-level construals). The informational and evaluative implications of high-level construals, compared with those of low-level construals, should therefore have more impact on responses to distant-future events than near-future events. This article explores the implications of construal level theory for temporal changes in evaluation, prediction, and choice. The authors suggest that construal level underlies a broad range of evaluative and behavioral consequences of psychological distance from events.
The general psychophysical law is that equal stimulus ratios produce equal subjective ratios. A first-order approximation is a power function whose exponent varies from 0.3 (loudness) to 2.0 (visual flash rate). This holds for Class I (prothetic) or quantitative continua, distinguishable by 4 criteria: "the j.n.d. increases in subjective size as psychological magnitude increases, category rating-scales are concave downwards when plotted against psychological magnitude, comparative judgments exhibit a time-order error… , and equisection experiments exhibit hystersis" (a lagging behind of apparent sense differences). Class II (metathetic) or qualitative continua are lacking in these 4 criteria. Psychological scales based on direct ratio methods are better than Fechnerian methods, e.g., method of paired comparisons. 75 references. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
A model explaining how the motive to achieve and the motive to avoid failure influences behavior assumes strength of motivation as being a multiplicative function of motive, expectancy, and incentive. This accounts for level of aspiration and also performance level when only one task is presented. "It also assumes that the incentive value of success is a positive linear function of difficulty as inferred from the subjective probability of success; and negative incentive value of failure to be a negative linear function of difficulty." 2 theoretical implications are "that performance level should be greatest when there is greatest uncertainty about outcome" and people with strong motive to achieve should prefer immediate risk whereas those with strong motive to avoid failure will prefer easy tasks or extremely difficult and risky tasks. Experimental results are cited with implications for research on gambling and social mobility aspirations. 22 references.
We use the proportional hazard model (PHM) to study purchase-timing behavior of households in two product categories: laundry detergents and paper towels. The PHM decomposes a household's instantaneous probability of buying the product at a point of time into two components: the baseline hazard that captures the household's intrinsic purchase pattern over time and the covariate function that captures the effects of marketing variables on the household's purchase timing decision. We compare the continuous-time and discrete-time PHMs, where the latter explicitly accounts for households' shopping trips that do not involve purchase of the product. We find that the discrete-time PHM empirically outperforms the continuous-time PHM in terms of explaining the observed purchase outcomes. We compare five different parametric specifications of the baseline hazard, and find that the three-parameter expo-power specification outperforms the exponential, Erlang-2, Weibull, and log-logistic specifications. We use a cause specific, competing-risks PHM to distinguish between two types of purchase events that differ in terms of whether or not they were preceded by a shopping trip that involved purchase of the product. Such a cause-specific, competing-risks PHM is shown to outperform the traditional discrete-time PHM. We then estimate a nonparametric version of the PHM and find that it does not offer any additional insights compared to the parsimonious parametric PHM. Finally, we accommodate unobserved heterogeneity across households by allowing all of the parameters of the PHM to follow a discrete distribution across households whose locations and supports are nonparametrically estimated from the data. We find evidence for substantial unobserved heterogeneity in the data, both in the parameters of marketing variables and in the baseline hazards. This study will be a useful reference to researchers hoping to use the PHM to study event times.
Consumer choice is often influenced by the context, defined by the set of alternatives under consideration. Two hypotheses about the effect of context on choice are proposed. The first hypothesis, tradeoff contrast, states that the tendency to prefer an alternative is enhanced or hindered depending on whether the tradeoffs within the set under consideration are favorable or unfavorable to that option. The second hypothesis, extremeness aversion, states that the attractiveness of an option is enhanced if it is an intermediate option in the choice set and is diminished if it is an extreme option. These hypotheses can explain previous findings (e.g., attraction and compromise effects) and predict some new effects, demonstrated in a series of studies with consumer products as choice alternatives. Theoretical and practical implications of the findings are discussed.
Consumers’ purchase time decisions are important elements of their buying decision process. Stochastic models of interpurchase time, which have been used extensively in the marketing literature, are parsimonious, easy to estimate, and usually fit and predict the data well. However, there has been a striking omission of marketing variables in these models. Because empirical evidence suggests that marketing variables, such as promotions, can affect consumers’ purchase time decisions, the author presents a methodology for including such variables in these stochastic models. Four commonly used models are discussed: exponential, Erlang-2 (no heterogeneity), and these two models with gamma heterogeneity. Thus one can include duration dependence, heterogeneity, and nonstationarity in the model, and also account for right-censored data. Special care is shown to be needed when covariates, such as marketing variables, vary over time. The models are analytically tractable, which makes their estimation and validation simple and fast. An illustration of the methodology is provided with scanner panel data for coffee. Inclusion of duration dependence, heterogeneity, and marketing variables is shown to improve the model's diagnostics, fit, and predictions.
The effectiveness of a sales promotion can be examined by decomposing the sales “bump” during the promotion period into sales increase due to brand switching, purchase time acceleration, and stockpiling. The author proposes a method for such a decomposition whereby brand sales are considered the result of consumer decisions about when, what, and how much to buy. The impact of marketing variables on these three consumer decisions is captured by an Erlang-2 interpurchase time model, a multinomial logit model of brand choice, and a cumulative logit model of purchase quantity. The models are estimated with IRI scanner panel data for regular ground coffee. The results indicate that more than 84% of the sales increase due to promotion comes from brand switching (a very small part of which may be switching between different sizes of the same brand). Purchase acceleration in time accounts for less than 14% of the sales increase, whereas stockpiling due to promotion is a negligible phenomenon accounting for less than 2% of the sales increase.
Two consumer strategies for the purchase of multiple items from a product class are contrasted. In one strategy (simultaneous choices/sequential consumption), the consumer buys several items on one shopping trip and consumes the items over several consumption occasions. In the other strategy (sequential choices/sequential consumption), the consumer buys one item at a time, just before each consumption occasion. The first strategy is posited to yield more variety seeking than the second. The greater variety seeking is attributed to forces operating in the simultaneous choices/sequential consumption strategy, including uncertainty about future preferences and a desire to simplify the decision. Evidence from three studies, two involving real products and choices, is consistent with these conjectures. The implications and limitations of the results are discussed.
What techniques can social scientists use when an outcome variable for a sample is not representative of the population for whom they would like to generalize the results? This book provides an introduction to regression models for such data including censored, sample-selected and truncated data.
The compromise effect denotes the finding that brands gain share when they become the intermediate rather than extreme option in a choice set. Despite the robustness and importance of this phenomenon, choice modelers have neglected to incorporate the compromise effect in formal choice models and to test whether such models outperform the standard value maximization model. In this article, the authors suggest four context-dependent choice models that can conceptually capture the compromise effect. Although the models are motivated by theory from economics and behavioral decision research, they differ with respect to the particular mechanism that underlies the compromise effect (e.g., contextual concavity versus loss aversion). Using two empirical applications, the authors (1) contrast the alternative models and show that incorporating the compromise effect by modeling the local choice context leads to superior predictions and fit compared with the traditional value maximization model and a stronger (naive) model that adjusts for possible biases in utility measurement, (2) generalize the compromise effect by demonstrating that it systematically affects choice in larger sets of products and attributes than has been previously shown, (3) show the theoretical and empirical equivalence of loss aversion and local (contextual) concavity, and (4) demonstrate the superiority of models that use a single reference point over "tournament models" in which each option serves as a reference point. They discuss the theoretical and practical implications of this research as well as the ability of the proposed models to predict other behavioral context effects.
The effectiveness of a sales promotion can be examined by decomposing the sales "bump" during the promotion period into sales increase due to brand switching, purchase time acceleration, and stockpiling. The author proposes a method for such a decomposition whereby brand sales are considered the result of consumer decisions about when, what, and how much to buy. The impact of marketing variables on these three consumer decisions is captured by an Erlang-2 interpurchase time model, a multinomial logit model of brand choice, and a cumulative logit model of purchase quantity. The models are estimated with IRI scanner panel data for regular ground coffee. The results indicate that more than 84% of the sales increase due to promotion comes from brand switching (a very small part of which may be switching between different sizes of the same brand). Purchase acceleration in time accounts for less than 14% of the sales increase, whereas stockpiling due to promotion is a negligible phenomenon accounting for less than 2% of the sales increase.
Consumers' purchase time decisions are important elements of their buying decision process. Stochastic models of interpurchase time, which have been used extensively in the marketing literature, are parsimonious, easy to estimate, and usually fit and predict the data well. However, there has been a striking omission of marketing variables in these models. Because empirical evidence suggests that marketing variables, such as promotions, can affect consumers' purchase time decisions, the author presents a methodology for including such variables in these stochastic models. Four commonly used models are discussed: exponential, Erlang-2 (no heterogeneity), and these two models with gamma heterogeneity. Thus one can include duration dependence, heterogeneity, and nonstationarity in the model, and also account for right-censored data. Special care is shown to be needed when covariates, such as marketing variables, vary over time. The models are analytically tractable, which makes their estimation and validation simple and fast. An illustration of the methodology is provided with scanner panel data for coffee. Inclusion of duration dependence, heterogeneity, and marketing variables is shown to improve the model's diagnostics, fit, and predictions.
Consumers' attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers' pricing policies. Addressing theoreticians and practitioners alike, this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self-control problems. For example, many regular smokers buy their cigarettes by the pack, although they could easily afford to buy 10-pack cartons. These smokers knowingly forgo sizable per-unit savings from quantity discounts, which they could realize if they bought cartons; by rationing their purchase quantities, they also self-impose additional transactions costs on marginal consumption, which makes excessive smoking overly difficult and costly.
Such strategic self-imposition of constraints is intuitively appealing yet theoretically problematic. The marketing literature lacks operationalizations and empirical tests of such consumption self-control strategies and of their managerial implications. This paper provides experimental evidence of the operation of consumer self-control and empirically illustrates its direct implications for the pricing of consumer goods. Moreover, the paper develops a conceptual framework for the design of empirical tests of such self-imposed constraints on consumption in consumer goods markets. Within matched pairs of products, we distinguish relative “virtue” and “vice” goods whose preference ordering changes with whether consumers evaluate immediate or delayed consumption consequences. For example, ignoring long-term health effects, many smokers prefer regular (relative vice) to light (relative virtue) cigarettes, because they prefer the taste of the former. However, ignoring these short-term taste differences, the same smokers prefer light to regular cigarettes when they consider the long-term health effects of smoking. These preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption. This creates a potential self-control problem, because these consumers will be tempted to overconsume the vices they have in stock at home. Purchase quantity rationing helps them solve the self-control problem by limiting their stock and hence their consumption opportunities. Such rationing implies that, per purchase occasion, vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts.
We first test this prediction in two laboratory experiments. We then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain-wide store-level demand across a variety of different pairs of matched vice (regular) and virtue (reduced fat, calorie, or caffeine, etc.) product categories. The analyses of these experimental, field, and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as, among others, potato chips, chocolate chip cookies, cream cheese, beer, soft drinks, ice cream and frozen yogurt, chewing gum, coffee, and beef and turkey bologna. Vice consumers' demand increases less in response to price reductions than virtue consumers' demand, although their preferences are not generally weaker for vices than for virtues. Constraints on vice purchases are self-imposed and strategic rather than driven by simple preferences. We suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption. As a result of purchase quantity rationing, however, vice buyers forgo savings from price reductions through quantity discounts, effectively paying price premiums for the opportunity to engage in self-control. Thus, purchase quantity rationing vice consumers are relatively price insensitive.
From a managerial and public policy perspective, our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self-control. They can charge premium prices for small sizes of vices, relative to the corresponding quantity discounts for virtues. Virtue consumers, on the other hand, will buy larger amounts even when quantity discounts are relatively shallow. A key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self-constraining consumer behaviors empirically. Moreover, this research is the first to extend previous, theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making.
This is a review of published theory and research on the assumptions that underlie Miller's conflict models. Operational distinctions are made between single-goal and multiple-goal conditions and, within the latter, the spatial, temporal, and stimulus dimensions. Major operational divergences in research outcomes are single- vs. multiple-goal conditions and strength-of-pull vs. other measures. Support for Miller's postulate system is equivocal, with considerable support available for several alternate postulates. A preferred interpretation is that response gradients can assume any degree of steepness or generality as a function of several manipulation and selection conditions. One manipulation variable, time before testing, produces flatter gradients which simulate unpracticed time-course effects. A major unfinished research area deals with the summation hypothesis or, more generally, specification of principles of combination for response gradients.
Much of the consumer behavior literature is devored to what has been referred to as theory applications (TA) research in which
the main focus is on laboratory experiments with student subjects and high internal validity. In this articlee, the author
argues that external validity concerns should be given more attention, particulary in TA research. Three recommendations are
made for implementing these concerns: (1) consumer behavior articles should be required to have a section indicating how increased
levels of external validity can be obtained with other studies, (2) “joint ventures” between consumer behavior and marketing
science researchers can be profitable and should be encouraged, and (3) analyses of electronic scanner panel data or other
secondary data can be used to generate higher levels of external validity. Three examples are given from the marketing literature
of how findings from experiments and scanner data can be combined to advance a stream of research.
Despite the proliferation of loyalty programs in a wide range of categories, there is little empirical research that focuses on the measurement of such programs. The key to measuring the influence of loyalty programs is that they operate as dynamic incentive schemes by providing benefits based on cumulative purchasing over time. As such, loyalty programs encourage consumers to shift from myopic or single-period decision making to dynamic or multiple-period decision making. In this study, the author models customers' response to a loyalty program under the assumption that purchases represent the sequential choices of customers who are solving a dynamic optimization problem. The author estimates the theoretical model using a discrete-choice dynamic programming formulation. The author evaluates a specific loyalty program with data from an online merchant that specializes in grocery and drugstore items. Through simulation and policy experiments, it is possible to evaluate and compare the long-term effects of the loyalty program and other marketing instruments (e.g., e-mail coupons, fulfillment rates, shipping fees) on customer retention. Empirical results and policy experiments suggest that the loyalty program under study is successful in increasing annual purchasing for a substantial proportion of customers.
Consumer choice is often influenced by the context, defined by the set of alternatives under consideration. Two hypotheses about the effect of context on choice are proposed. The first hypothesis, tradeoff contrast, states that the tendency to prefer an alternative is enhanced or hindered depending on whether the tradeoffs within the set under consideration are favorable or unfavourable to that option. The second hypothesis, extremeness aversion, states that the attractiveness of an option is enhanced if it is an intermediate option in the choice set and is diminished if it is an extreme option. These hypotheses can explain previous findings (e.g., attraction and compromise effects) and predict some new effects, demonstrated in a series of studies with consumer products as choice alternatives. Theoretical and practical implications of the findings are discussed.
Two consumer strategies for the purchase of multiple items from a product class are contrasted. In one strategy (simultaneous choices/sequential consumption), the consumer buys several items on one shopping trip and consumes the items over several consumption occasions. In the other strategy (sequential choices/sequential consumption), the consumer buys one item at a time, just before each consumption occasion. The first strategy is posited to yield more variety seeking than the second. The greater variety seeking is attributed to forces operating in the simultaneous choices/sequential consumption strategy, including uncertainty about future preferences and a desire to simplify the decision. Evidence from three studies, two involving real products and choices, is consistent with these conjectures. The implications and limitations of the results are discussed.
The analysis of censored failure times is considered. It is assumed that on each individual are available values of one or more explanatory variables. The hazard function (age-specific failure rate) is taken to be a function of the explanatory variables and unknown regression coefficients multiplied by an arbitrary and unknown function of time. A conditional likelihood is obtained, leading to inferences about the unknown regression coefficients. Some generalizations are outlined. LIFEtables are one of the oldest statistical techniques and are extensively used by medical statisticians and by actuaries. Yet relatively little has been written about their more formal statistical theory. Kaplan and Meier (1958) gave a comprehensive review of earlier work and many new results. Chiang in a series of papers has, in particular, explored the connection with birth-death processes; see, for example, Chiang (1968). The present paper is largely concerned with the extension of the results of Kaplan and Meier to the comparison of life tables and more generally to the incorporation of regression-like arguments into life-table analysis. The arguments are asymptotic but are relevant to situations where the sampling fluctuations are large enough to be of practical importance. In other words, the applications are more likely to be in industrial reliability studies and in medical statistics than in actuarial science. The procedures proposed are, especially for the two-sample problem, closely related to procedures for combining contingency tables; see Mantel and Haenzel (1959), Mantel (1963) and, especially for the application to life tables, Mantel (1966). There is also a strong connection with a paper read recently to the Society by R. and J. Peto (1972). We consider a population of individuals; for each individual we observe either the time to "failure" or the time to ccloss" or censoring. That is, for the censored individuals we know only that the time to failure is greater than the censoring time. Denote by T a random variable representing failure time; it may be discrete or continuous. Let F(t) be the survivor function, %(t) = pr (T2 t)
In an experiment reported elsewhere the author obtained incidentally some data which are considered in the present article in view of Hull's hypothesis on the goal gradient. The problem being investigated was that of time discrimination in the rat. The animal, after being released from a starting box, entered one of two detention chambers in which he was confined for a given length of time, after which he was allowed to go on to the food box. His problem was to learn to enter the box in which he was confined for the shortest time. In such a situation, animals having long detention times are farther removed from the goal (in time) than those having short detention times. Incidentally the time spent in the runway, i.e. the time elapsing between the release of the animal and his entering a detention chamber, was recorded. It was found that animals who had the longer detention times traversed the runway less rapidly, or dallied more either in starting or in entering a detention compartment. These findings, taken as confirmatory of the goal gradient hypothesis, are what might be expected from Hull's deduction that animals in traversing a maze will move at a progressively rapid pace as the goal is approached.
The analysis of censored failure times is considered. It is assumed that on each individual are available values of one or more explanatory variables. The hazard function (age‐specific failure rate) is taken to be a function of the explanatory variables and unknown regression coefficients multiplied by an arbitrary and unknown function of time. A conditional likelihood is obtained, leading to inferences about the unknown regression coefficients. Some generalizations are outlined.
Over the past few years, customer relationship management and loyalty programs (LPs) have been widely adopted by companies and have received a great deal of attention from marketers, consultants, and, to a lesser degree, academics. In this research, the authors examine the effect of the level of effort required to obtain an LP reward on consumers' perception of the LP's attractiveness. The authors propose that in certain conditions, increasing program requirements can enhance consumers' likelihood of joining the program, thus leading consumers to prefer a dominated option. Specifically, the authors hypothesize that consumers often evaluate LPs on the basis of their individual effort to obtain the reward relative to the relevant reference effort (e.g., the effort of typical other consumers). When consumers believe they have an effort advantage over typical others (i.e., an idiosyncratic fit with the LP), higher program requirements magnify this perception of advantage and can therefore increase the overall perceived value of the program. The authors support this proposition in a series of studies in which the perceived idiosyncratic fit was manipulated either by reducing the individual effort or by raising the reference effort. The authors' findings also indicate that (1) idiosyncratic fit considerations are elicited spontaneously, (2) idiosyncratic fit mediates the effect of effort on consumer response to LPs, and (3) an alternative account for the results based on signaling is not supported. The authors conclude that the findings are part of a broader phenomenon, which they term the "idiosyncratic fit heuristic," whereby a key factor that affects consumers' response to marketing programs and promotional offers is the perceived relative advantage or fit with consumers' idiosyncratic conditions and preferences.
Behavioral decision research: A constructive processing perspective
The principles of conflict behavior—rather than its experimental production—are considered here. A theoretical analysis in terms of approach and avoidance situations is followed by a thorough consideration of experimental evidence testing deductions from the theory. Bibliography. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
The hypothesis, which is an extension of Hull's goal reaction hypothesis, is that the goal reaction gets conditioned most strongly to the stimuli preceding it, and the other reactions in the sequence get conditioned to their stimuli, with a strength inversely proportional to their temporal or spatial remoteness from the goal reaction. Since this assumes a gradient, which is related to the goal, he calls it a goal-gradient. The shape of this gradient is shown, by reference to Yoshioka's experiment in selection of maze pathways by the rat, to be positively accelerated, and to conform to the logarithmic law. The author deduces ten actual behavior phenomena from his principle, such as choice of shorter path, order of elimination of blind alleys, relative rates of locomotion in different parts of the maze, etc. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Hungry rats trained to traverse a runway in which the time spent in each section was automatically recorded manifested, during initial training, an increased speed as the goal was approached. There was in the last section of the runway, however, a marked retardation in speed of locomotion. This final retardation occurred in both a 20-foot and a 40-foot runway. As training continued there was a leveling of the gradient, including the retardation at the end. Composite gradients were obtained by training the animals on a 20-foot section and then on a 40-foot section. Continued training again leveled the contours of the gradient. The speed-of-locomotion gradient which had been reduced by training was revived by removal of the food reward. Gradients which differed somewhat from the original ones and from each other became evident when satiation and frustration techniques were introduced after considerable training had obliterated the contours of simple and compound gradients. Change from hunger to thirst motivation produced only slight disturbances. The results are regarded as a general substantiation of the author's deductions concerning the goal gradient. A complexity of phenomena not demanded by the hypothesis is also revealed. Inertia characteristic of starting as such and retardation in the final unit are two such phenomena. Bibliography. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
People often need to trade off between the probability and magnitude of the rewards that they could earn for investing effort. The present paper proposes that the conjunction of two simple assumptions (relating effort-induced reward expectations to prospect theory's value function) provides a parsimonious theory that predicts that the nature of the required effort will have a systematic effect on such trade-offs. Using the case of frequency (or loyalty) programs, a series of five studies involving both real and hypothetical choices demonstrated that (a) the presence (as opposed to absence) of effort requirements enhances the preference for sure-small rewards over large-uncertain rewards; (b) the preference for reward certainty is attenuated when the effort activity is intrinsically motivating; and (c) continuously increasing the effort level leads to an inverted-U effect on the preference for sure-small over largeuncertain rewards. The studies also employ process measures and examine the mechanisms underlying the impact of the effort stream on the trade-off between the certainty and magnitude of rewards. The final section discusses the theoretical implications of this research as well as the practical implications with respect to frequency programs and other types of incentive systems.
Some statistical methods developed recently in the biometrics and econometrics literature show great promise for improving the analysis of duration times in marketing. They incorporate the right censoring that is prevalent in duration times data, and can be used to make a wide variety of useful predictions. Both of these features make these methods preferable to the regression, logit, and discriminant analyses that marketers have typically used in analyzing durations.
This paper is intended to fulfill three objectives. First, we demonstrate how decision situations that involve durations differ from other marketing phenomena. Second, we show how standard modeling approaches to handle duration times can break down because of the peculiarities inherent in durations. It has been suggested in recent marketing articles that an alternative to these conventional procedures, i.e., hazard rate models and proportional hazard regression, can more effectively handle duration type data. Third, to investigate whether these proposed benefits are in fact delivered for marketing durations data, we estimate and validate both conventional and hazard rate models for household interpurchase times of saltine crackers. Our findings indicate the superiority of proportional hazard regression methods vis-à-vis common procedures in terms of stability and face validity of the estimates and in predictive accuracy.
The economic theory of the consumer is a combination of positive and normative theories. Since it is based on a rational maximizing model it describes how consumers should choose, but it is alleged to also describe how they do choose. This paper argues that in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory. In these situations economic theory will make systematic errors in predicting behavior. Kanneman and Tversey's prospect theory is proposed as the basis for an alternative descriptive theory. Topics discussed are: undeweighting of opportunity costs, failure to ignore sunk costs, scarch behavior choosing not to choose and regret, and precommitment and self-control.
The authors propose that what consumers buy can be systematically influenced by how much they buy. They hypothesize that, as the number of items purchased in a category on a shopping occasion increases, a consumer is more likely to select product variants (e.g. yogurt flavors) that s/he does not usually purchase. They used yogurt scanner data to support this hypothesis. This study also revealed that consumers were more likely to select their regular brands when purchasing more containers of yogurt on a given occasion. A laboratory experiment showed that this reflects the combined impact of purchase quantity and product-display format (i.e., the by-brand display of yogurt in supermarkets) on consumer choice. Copyright 1992 by the University of Chicago.
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
We argue that goals serve as reference points and alter outcomes in a manner consistent with the value function of Prospect Theory (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). We present new evidence that goals inherit the proper ties of the value function-not only a reference point, but also loss aversion and diminishing sensitivity. We also use the value function to explain previous empirical results in the goal literature on affect, effort, persistence, and performance. (C) 1999 Academic Press.
Frequent Shopper programs are becoming ubiquitous in retailing. Retailers seem unsure however about whether these programs are leading to higher loyalty, or to higher profits. In this paper we analyze data from a US supermarket chain that has used a number of frequent shopper rewards to improve sales and profitability. We find that while these programs are profitable, this is only because substantial incremental sales to casual shoppers (cherry pickers) oset subsidies to already loyal customers. In this way our findings are inconsistent with existing theories about how frequent shopper programs are supposed to work. We construct our own Hotelling-like model that explicitly models cherry picking behavior and show that its predictions match the data quite closely. We further test the predictions of our model by characterizing the impact of such programs on trip frequency and basket size. We then use the model to examine more complex scenarios. For example, our analysis suggests that frequent shopper programs may be unprofitable if they eliminate all cherry picking. This may explain why some retailers seem dissatisfied with their programs. We end by proposing a solution that retains the benefits of the frequent shopper programs and yet continues to let supermarkets benefit from price discrimination.
One of basic functional relationships in the Keynesian model of the economy is the liquidity preference schedule, an inverse relationship between the demand for cash balances and the rate of interest. This aggregative function must be derived from some assumptions regarding the behavior of the decision-making units of the economy, and those assumptions are the concern of this paper.
Analysis of decision making under risk has been dominated by expected utility theory, which generally accounts for people's actions. Presents a critique of expected utility theory as a descriptive model of decision making under risk, and argues that common forms of utility theory are not adequate, and proposes an alternative theory of choice under risk called prospect theory. In expected utility theory, utilities of outcomes are weighted by their probabilities. Considers results of responses to various hypothetical decision situations under risk and shows results that violate the tenets of expected utility theory. People overweight outcomes considered certain, relative to outcomes that are merely probable, a situation called the "certainty effect." This effect contributes to risk aversion in choices involving sure gains, and to risk seeking in choices involving sure losses. In choices where gains are replaced by losses, the pattern is called the "reflection effect." People discard components shared by all prospects under consideration, a tendency called the "isolation effect." Also shows that in choice situations, preferences may be altered by different representations of probabilities. Develops an alternative theory of individual decision making under risk, called prospect theory, developed for simple prospects with monetary outcomes and stated probabilities, in which value is given to gains and losses (i.e., changes in wealth or welfare) rather than to final assets, and probabilities are replaced by decision weights. The theory has two phases. The editing phase organizes and reformulates the options to simplify later evaluation and choice. The edited prospects are evaluated and the highest value prospect chosen. Discusses and models this theory, and offers directions for extending prospect theory are offered. (TNM)