Probabilistic Promotion

In a blog post on 12 Nov. Dan Ariely, popular evangelist of behavioral economics, advanced an idea to promote his latest book, “The Upside of Irrationality”. The idea is: If you were to buy the book in any version by Nov 20th you could be selected at random to have dinner with him (you need to register on a site with your receipt to be eligible). It’s a smart idea—especially (and only) if there are enough people who would like to watch you power down a few crab cakes while also asking you tons of questions. I suspect Dan was not worried about the size of his fan base, so his promotion is likely to be a success. He’s a true marketer.

This idea of probabilistic promotion is all about giving people an extra incentive to make a purchasing decision within some specific timeframe. There are, of course, a lot of ways to promote a product. Those of us in marketing become familiar with these. For example, typical sales promotion techniques include (these are just a few among very many):

  • Price reduction
  • Coupons
  • Rebate
  • Loyalty programs
  • Contest/Sweepstakes
  • Game

The “probabilistic promotion” that Dan employs is a type of contest or game (they are not always the synonymous). What Dan introduces is an element of chance that is, at least in my view, pretty enticing—you buy the book, but you might also get to have dinner with Dan as a “bonus”. Another type of probabilistic promotion that we are familiar with is the games that soda manufactures create. All you have to do to play is buy a soda and look at the printed “cap code”. Sometimes you instantly win. However, if you go to a Web site and input the cap code you become eligible for some big prizes (although it’s hard to imagine a prize bigger than dinner with Dan!). Marketers know very well the conversion rate on these cap code games/sweepstakes and their effectiveness in moving product.

As consumers, we tend to look at the “wins” in these probabilistic promotions as bonuses. But, how much is this really so? The question is not whether it’s a bonus to get a free soda, free Corvette ZR1 (very nice!), or the chance to watch Dan polish off some sushi is a bonus. Rather—what becomes interesting is finding out the extent to which the “bonus” enticement was what motivated the purchasing decision.

On one end of things, the consumer made the purchase solely to get the “bonus” item. It defies commonsense to think that many people would do this, but some actually do nonetheless. For example, most people who want dinner with Dan would find his book interesting (IOW: they didn’t just pick “having dinner with Dan Ariely” out of thin air as their pursuit). They arrived at that idea because they like his books and blog posts. We can imagine that this group is the largest population. On the other end of the spectrum are people who may win but could care very little or not at all about the promotion. Smart marketers will close the loop and determine how much impact the promotion had on the purchasing decision of a given population. Dan has announced the winner of his promotion and advanced some observations about its effectiveness.

–John R. Durant

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About John R. Durant

Drawing on years fostering innovation in the high-tech industry, most notably at Microsoft, John is a principal researcher at Savvysherpa building new businesses.
This entry was posted in Behavior, Economics, Experiments, Innovation, Marketing, Retail and tagged , , , . Bookmark the permalink.

One Response to Probabilistic Promotion

  1. Aaron says:

    Ariely is indeed a true marketer…kind of like a Seth Godin/Steven Levitt mash up.

    Like Levitt he Takes a potentially interesting academic niche (any thing in economics is fair game) and convert it to a layman wanna-be-philosopher’s watercooler talk by personalizing it and making it slightly controversial. And he does quite well actually..better than most academics (I wonder if Ariely wrote it all himself)

    This recent promotional tactic shows me that Ariely is getting serious about taking the next step in building his brand. Movign from academic to pop psychology writer to brand manager/multi-revenue stream businessman means he has to move away from his publisher as a primary promoter and develop his own direct marketing database.

    I’m sure that 90% of the people who entered into this irrational contest were going to buy his book anyway. He has just made another step in self publishing, renegotiating with HarperCollins, or moving to another publisher. This promo is reminiscent of Seth Godins many tactics from 10 years ago…

    recommend reading: The Paradox of Choice….not as well written, but certainly full of good ideas to chew on.

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