Fear of loss, desire for gain

Found myself in the mall this weekend (gasp) at a Lord & Taylor (go figure) and discovered the oddest promotion.

After I purchased $200 worth of stuff, the salesperson said, "you qualified for two gift certificates worth $40. No strings attached. Go upstairs and you can get them right now."

Note: no notice before the purchase. No signs, no promises. The certificates weren’t designed as an inducement to get me to buy anything.

"Why would they spend 10% of revenue and perhaps 30% of profit for no reason?" I wondered.

I headed upstairs, waited for two minutes and got my certificates, just so I could let you, my gentle readers, know about this crazy scheme. Walked over to the tie department and bought $39 worth of beautiful ties, marked down from $100 (hey, I’m cheap…) and I was done.

On my way out, I passed this woman:Lordtaylorbags_1
Here’s her deal. She was on her FOURTH batch of gift certificates. Every time she got $20, she needed to spend it right away. She ended up spending more than $100 each time, so she then went back to get another ceritificate or two, but needed to spend it, and on and on and on. A quick talk with the gift certificate dispensing person confirmed that this was far from unusual behavior. It was a frenzy.

So, people "earn" the certificate, but unable to resist the fear of losing what was theirs, went over and collected it. But now that they have it, it’s "free money" so they go and spend it, and the cycle continues.

This is so much more effective than the typical mark down.

I bet it would work even better online. Imagine how it could help shopping cart conversion…