A Comparison of Probabilistic Prize Promotion Schemes

By Chen, Rong; Huang, Jinsong et al. | Social Behavior and Personality: an international journal, August 10, 2012 | Go to article overview
Save to active project

A Comparison of Probabilistic Prize Promotion Schemes


Chen, Rong, Huang, Jinsong, Su, Song, He, Feng, Social Behavior and Personality: an international journal


Based on the rank-dependent expected utility model (Quiggin, 1991), hypotheses are formed in this study regarding optimal prize promotion structure with reference to associated probabilistic aspects. Referencing both modeling works and related behavioral theories, we compared several design schemes. Using purchase scenarios of a low-value product (bread) and a high-value product (cell phone) we determined the optimal design among promotion schemes that differ by winning probability, prize amount, and number of prize value levels. We found that a promotion offering a combination of high-value prizes plus some low-value prizes was invariably preferred over a promotion offering only high- or low-value prizes. We also explored whether these high- or low-value prizes should be in a series of ascending value or prizes at each value level should be of the same value and whether or not some moderately valuable prizes should also be included.

Keywords: probabilistic prize promotion, rank-dependent expected utility, promotion structure.

(ProQuest: ... denotes formulae omitted.)

The term probabilistic prize promotion refers to the activity of providing chances for consumers to win various kinds of prizes such as cash, gifis, opportunities to travel, and so on, through activities such as competition, prize drawing, or games (Kotier & Keller, 2006). Compared with other forms of promotion, probabilistic prize schemes are more flexible because they can fit into different structures with different content. However, many factors are likely to affect their effectiveness, such as prize structure, the value of promoted products, monetary value of the prizes, and the probability of winning a prize (Erev & Haruvy, 2010; Howard & Barry, 1990). When choosing probabilistic prize promotion as a marketing tool, promotion organizers tend to be subjective and blinkered (Erev & Haruvy, 2010). Therefore, a scientific, systematic, theoretical, and empirical study of the factors involved in the process of probabilistic prize promotion is likely to be of great practical value to those responsible for designing marketing strategies for enterprises.

Design is an important aspect in probabilistic prize promotion. However, in previous studies only probability levels under extreme conditions, that is, high or low probability, have been examined (e.g., Chen & Jia, 2005). Comparisons among various kinds of probabilities, including moderate levels and the intricate structure of incentive/probability design, have seldom been addressed in a real-life setting. In this study our aim was to determine the optimal design of incentives, first through a process of modeling, verification, and development, and then by experimenting with the propositions we had developed in the modeling stage and that were also based on relevant theories of behavioral economics.

Literature Review

Probability /prize design is the core of the study of probabilistic prize promotion schemes. Chen (2007) conducted research on the effectiveness of two different kinds of promotions, namely a low probability of winning a prize worth a large amount of money and a certainty of winning a gift of small monetary value. She found that when the promotion involves high-priced products, the former prize option proves more effective, whereas there is no significant difference between the two options when selling low-priced products.

Lin, Ke, and Tao (2008) found that, for high-priced products, as the prize value increases, the effect of the promotion takes the shape of a reversed U curve, and as the value declines, the effect takes the shape of a U curve. For low-priced products, the effect of the promotion was not found to be significantly different whether the prize was of a high or low value.

Some other scholars consider a probabilistic prize as an imprecise discount and have compared this with traditional sales promotions in which a discount is a fixed amount.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

A Comparison of Probabilistic Prize Promotion Schemes
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?