The windfall gain effect: Using a surprise discount to stimulate add-on purchases

Esther L. Kim, Sarah Tanford

Research output: Contribution to journalArticlepeer-review

Abstract

How can the business maximize revenue while providing discounts? This research suggests that hospitality operators may stimulate add-on purchases with the adoption of surprise discounts. Two experiments investigated factors that influence hospitality consumers’ ancillary spending. Study 1 tested the discount and product type effects on additional spending intentions for a cruise booking. Study 2 identified how the depth of surprise discount and add-on product type influence consumers' add-on purchase decisions for an online hotel booking. The findings indicate that a surprise discount and hedonic items induce consumers' unplanned purchases. A hedonic add-on item is preferred over a utilitarian item when a low discount is offered. Impulse buying mediates the effect of surprise discount and product type on unplanned purchase intentions. This research extends the traditional discount role, by demonstrating that a discount promotion can induce consumers' additional purchases. The findings provide guidance for effective pricing strategies and add-on marketing mix.

Original languageEnglish
Article number102918
JournalInternational Journal of Hospitality Management
Volume95
DOIs
StatePublished - May 2021

Keywords

  • Hedonic value
  • Impulse buying
  • Surprise discount
  • Unplanned purchase
  • Utilitarian value
  • Windfall gain

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