The Decline of Limited-Time Offer Effectiveness [E-Commerce Trends]

Journal of Marketing Research Scholarly Insights are produced in partnership with the AMA Doctoral Students SIG – a shared interest network for Marketing PhD students across the world.

In the fast-paced world of retail, marketers are constantly seeking innovative strategies to capture consumer attention and drive sales. Time scarcity promotions are powerful tools that allow brands to break through the noise and create a sense of urgency that compels customers to take immediate action. These promotions typically involve offering discounts, deals, or exclusive offers that are only available for a specific period or until a certain deadline. Common examples of time scarcity promotions include flash sales, limited time offers, countdown timers, and expiring discount codes. By emphasizing the limited availability of the offer, time scarcity promotions aim to drive consumer interest, increase conversion rates, and stimulate immediate action.

Such strategies are mainstays in both brick-and-mortar and online retail contexts—but can firms expect the same level of effectiveness in both settings?

Time Scarcity Promotions Online Versus Offline

A recent Journal of Marketing Research article by Jillian Hmurovic, Cait Lamberton, and Kelly Goldsmith sheds light on the efficacy of these promotions. The authors explored the effectiveness of time scarcity promotions in online retail compared to offline, while also examining the optimal implementation strategies in the online context.

Contrary to previous findings in brick-and-mortar settings, this research suggests that the positive effects of time scarcity promotions may not be as robust in online settings. The findings show that online time scarcity promotions tend to be less effective than promotions without time limits, largely due to the activation of increased persuasion knowledge by consumers (i.e., consumers online are more aware that the retailer is trying to persuade them with a promotion). Furthermore, the study reveals that online time scarcity promotions can be more effective when the justification for the time limit is outside of the retailer’s control, such as when the promotion involves a consumer’s birthday, a holiday, or a change of season.

Online time scarcity promotions can be more effective when the justification for the time limit is outside of the retailer’s control, such as when the promotion involves a consumer’s birthday, a holiday, or a change of season.

However, the authors caution against assuming that online time scarcity promotions will consistently outperform identical online control promotions. They emphasize the need for careful managerial implementation and further research to better understand the optimal translation of offline tactics to the online retail environment. In a time when marketers face tightening budgets and high demands, understanding the limits of offline promotions in the online world may be critical for retail success.

To further explore the dynamics involved in time scarcity promotions, we interviewed the authors for some behind-the-scenes insights into the research process and findings:

Q: What phenomena inspired you to study online time scarcity promotions? How did you develop the idea for this research paper?

A: A key inspiration for this paper came from observing the disconnect between how time scarcity promotions are implemented in the contemporary marketplace and how time scarcity promotions have been studied in the marketing literature. Time scarcity promotions are widely used online, yet much of the empirical work in this area predates the proliferation of e-commerce and examines time scarcity promotions intended for offline retail contexts (e.g., newspaper inserts, physical coupons, supermarket flyers, and print advertisements). To date, limited marketing literature has directly examined time scarcity appeals in their contemporary online forms. Because of the transformative changes the internet has had for the retail marketplace, consumer experience, and promotion implementation, this raised questions about the applicability of pre-internet, offline effects to the modern-day, online retail context. Ultimately, these questions spurred a deeper exploration of time scarcity promotions and, more generally, an interest in online retailing and communications.

Q: What are the main implications of this research for managerial decision making?

A: The research offers several practical insights. For one, results suggest time scarcity promotion tactics may be relatively less effective when implemented in online retail contexts compared to offline retail contexts. Furthermore, findings suggest that online time scarcity promotions can activate more persuasion knowledge than identical control promotions. Critically for marketers, however, providing justification for the online promotion’s timeframe that is exogenous to the retailer can produce positive effects. As such, marketers attempting to translate traditionally offline promotional tactics to the online environment may therefore want to consider the online context’s nature and consumers’ persuasion knowledge schema. In addition, retailers wanting to implement time scarcity promotions online may benefit from justifying the deal’s limited timeframe in terms of an event that is not under the retailer’s control. More broadly, and perhaps more importantly, the findings also suggest that retailers implementing online time scarcity promotions may want to temper their efficacy expectations. In this article, positive effects of online time scarcity promotions primarily emerged in relatively costless engagement activities, typically occurring early in the purchase funnel, such as opening an email or clicking a Facebook ad. This suggests online time scarcity promotions might be better utilized as part of marketing promotion strategies aimed at building awareness rather than immediately driving sales.

Q: Your research explores the (in)effectiveness of time scarcity marketing promotions in the online retail context. Did you identify any cognitive or emotional processes that were particularly influential in driving consumer responses to time-limited offers?

A: Our study focuses on persuasion knowledge activation, predicting that online time scarcity promotions activate more persuasion knowledge than identical control promotions. Despite its theoretical importance and practical usefulness, persuasion knowledge is not the only difference between offline and online retail contexts that might affect offline-to-online promotion translation. The article also discusses three additional critical psychological differences between online and offline retail contexts that warrant further exploration: search costs, experience of psychological distance, and arousal.

Q: Your research provides generalizable findings across various product categories. It is also important to note that consumers’ expectations and behavior toward services may differ from those toward products. Do you anticipate similar outcomes for services, and if so, why?

A: At least two of the studies in the article involve products that possess experiential features (e.g., recording music, delivering food); however, it remains an open empirical question whether providing a retailer-exogenous justification for the time restriction associated with an online time scarcity promotion similarly enhances consumer interest for services. The paper’s predictions suggest that to the extent that the online time scarcity promotion for services similarly activates persuasion knowledge, one would anticipate a similar pattern of results to emerge. By the same logic, however, identifying distinct features of services (vs. material goods) that theory suggests could alter persuasion knowledge activation may reveal specific testable hypotheses to investigate. As noted in the paper, future work needs to continue to examine the various moderators of online time scarcity promotions and their efficacy. To that end, probing the product category represents a natural extension of such efforts.

Q: To what extent do you view positive customer reviews as a means to mitigate the negative impact of time scarcity promotions on consumers’ persuasion knowledge? Considering that time constraints can divert attention from the true value of a deal, would you perceive positive customer reviews as a potential remedy for such distractions?

A: Although specifically examining the role of customer reviews was beyond the scope of this work, this speaks to the bigger question of how marketers can increase the likelihood that online time scarcity promotions are effective. Our article suggests incorporating elements that reduce persuasion knowledge activation can, under some conditions, increase the effectiveness of online time scarcity promotions. Although the article purposely focuses on aspects of the online time scarcity promotion that marketers can directly alter (e.g., justification for the time limitation of the discount, time remaining until expiry), future research could focus on features of the online retail context over which marketers have comparatively less control (e.g., user-generated customer reviews). It’s possible that positive customer reviews may offset persuasion knowledge activation in ways that can increase the efficacy of online time scarcity promotions, for example by enhancing the online retailer’s credibility, reducing perceived purchase risk, or providing social proof, although such effects may depend on the degree to which consumers perceive positive customer reviews to be authentic and free from retailer influence. Ideally, continued systematic exploration will provide a richer and more comprehensive understanding of the various contextual, promotional, and methodological moderators of online time scarcity promotions. There remains much to be explored!

Q: Your research article offers two field studies. Can you reflect on the process of developing partnerships with companies? Are there any tips (and/or pitfalls) for researchers and practitioners on implementing these partnerships? What benefits can companies get when partnering with academics to endeavor research? Can you cite specific outputs that the companies received in this research project?

A: Developing successful partnerships with companies can be challenging, particularly for early-career academics; however, there are multiple ways to foster such collaborations. Examples include reaching out to colleagues, professional contacts, or alumni who may have connections with companies interested in research partnerships; attending conferences or seminars that provide opportunities to initiate conversations with professionals about potential research collaborations; joining interdisciplinary research teams investigating complex issues with established industry partners; and organizing informal interviews with industry professionals about their firsthand insights and ongoing challenges related to the phenomenon of interest.

Companies can derive several potential benefits from partnering with academics. A few include accessing specialized expertise, skills, and tools that may not be readily available within the organization; developing innovative practices and interventions supported by rigorous research methodology and analysis; conducting research experiments that would otherwise be too difficult or costly to conduct independently; and tackling specific challenges facing the company while concurrently enhancing the firm’s reputation within the industry.

Although specific outputs will depend on the nature of the collaboration, it’s common for companies engaging in research partnerships to receive outputs such as research reports and briefs, data analysis code and results, detailed recommendations, and insights, as well as presentations showcasing findings and impact.