Retailers increasingly use a variety of shopper marketing tools — from sale signs and special promotions to more subtle environmental cues such as sounds and scents — in an effort to increase sales. The tools are often costly, and it’s not clear that they always work as intended. While the economy continues its sluggish recovery, firms regularly try to optimize their spending to maximize sales.
Professor Leonard Lee, working with Ziv Carmon of INSEAD, Ravi Dhar of Yale, and Ayelet Fishbach of University of Chicago, took a closer look at the efficacy of shopper marketing tools. The researchers conducted lab and field experiments designed to measure shopper behavior and learn about the psychological impact of shopper marketing tools. They find that pushing these tools can actually induce an effect they call the ironic prudent spending effect, in which shoppers perceive the promotions as reminders to not spend too much rather than as prompts to spend more.