Are Special Offers Hurting Your Sales?

By BenAmbridge

16.06.2016

  • Don’t rely on extrinsic motivators such as special offers to increase sales
  • Instead, make sure your website is attractive and captures your visitors’ attention to maximise their intrinsic motivation

Many websites use popups offering discounts or special offers such as free shipping. There’s a reason why this strategy is so common: it works.

At least in the short term. A/B testing usually reveals that, as you would expect, discounts encourage customers to purchase. But, in the long term, we often find that discounts hurt sales.

How is this possible? Imagine you run a private nursery, and have a long-standing problem with parents collecting their children late. In fact, the problem has got so bad that you are forced to pay at least one staff member overtime almost every day. In order to discourage late pick-ups, you decide to introduce a flat-rate fine of £5 for each. You then look on in horror as the rate of late pick-ups increases. Of course, you quickly stop the fines, but the rate of late pick-ups never goes back down to what you now look back on as “the good old days”.

Sounds far-fetched? Uri Gneezy, Professor of Economics and Strategy at the University of California, ran an A/B test along these line with 10 nurseries in Israel. Sure enough, late pick-ups increased at the nurseries in which fines were introduced (and remained high when they were dropped), but not at the nurseries in the control condition.

These results start to make sense in the light of psychologists’ distinction between intrinsic and extrinsic motivation. Simply put, intrinsic motivation is doing something because you want to; extrinsic motivation is doing something because some external factor—a person, an organisation, your bank balance—is forcing you to do so. Before the Israeli nurseries introduced fines, most people usually picked up their kids on time, with only the odd lapse, because they were intrinsically motivated to do so: they wanted to be good parents and not to inconvenience the nursery staff. But when the fines came in, parents’ motivation switched from being intrinsic to extrinsic: it became all about avoiding the fines.

Once it’s gone, it could be gone forever
Crucially, as this example shows, once intrinsic motivation has been lost, it is nigh-on impossible to get it back. When the nurseries dropped the fines, parents didn’t rediscover their intrinsic motivation to pick up their kids on time. With the extrinsic motivation—the fine—gone, many simply didn’t bother. And this isn’t just a quirk of parents and nurseries: a meta-analysis that combined the findings of 128 studies found that paying people to succeed at, complete, or even just take part in a diverse range of activities significantly decreased their intrinsic motivation to do so. (Interestingly, this was even more true for children—so don’t be tempted to pay yours to eat their greens or do their homework.)

If we apply these findings to your website, we can see why discounts and special offers often backfire. You want your customers to purchase from your site because they want to (intrinsic motivation), not because they feel compelled to take advantage of a one-time offer (extrinsic motivation). As the nursery example shows, once your customer’s motivation has switched from intrinsic to extrinsic, it stays there. So when there’s no extrinsic motivation—i.e., no special offer—he or she won’t buy.

So, psychology—in this case, something called self-determination theory—can tell us what you shouldn’t do. But can it offer us any positive recommendations, and tell us what you should do?

Maximise intrinsic motivation
Yes: The key is to try to max-out your customer’s intrinsic motivation. We all have a psychological need for self-determination—the feeling that we’re engaged with something that we’re interested in and excited about; that we’re an expert in and can smoothly navigate our way through. We all have a need, that is, for what athletes and artists call “flow”. For the majority of us who aren’t athletes or artists, a popular way to experience flow is to browse a familiar, well-designed website. Many visitors to your website, that is, will be there for no reason other than that they want to be, acting on intrinsic motivation in its purest form. In fact, one recent study found that the people who made the largest and most frequent online purchases were not those who found online shopping the most useful, but those who experienced the most absorption (i.e., flow).

The lesson is clear: If you want people to spend money on your website, don’t rely on extrinsic motivators such as special offers, which can often backfire. Instead, maximise your visitors’ intrinsic motivation by ensuring that your site is attractive and absorbing.

BenAmbridge
Hi, I’m Ben. I’m a Reader in Psychology at the University of Liverpool and I lead consumer psychology at Endless Gain. I’m interested in how research findings from academic psychology can be applied in our everyday lives as consumers. And, importantly how psychology plays an influential role in ecommerce. I write a weekly psychology column for The Observer, and my book Psy-Q: You Know Your IQ - Now Test Your Psychological Intelligence has been translated into 15 languages. Check out my TED talk, "Ten Myths about Psychology, Debunked".

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