Cashbacks “In the nick of time”: consumers’ sensitivity to promotion delays and impact on promotion judgments

Abstract

Purpose

Given the growing acceptance of cashback offers (e.g. $10 PayPal cashback within 24 hours of the transaction) among retailers, this paper aims to understand how consumers evaluate them vis-à-vis traditional price-discounts and their subsequent impact on retailers’ promotional strategies.

Design/methodology/approach

Six experimental studies examine if and when consumers can discern differences in the time-of-reward-accrual (i.e. the waiting time associated with receiving promotional savings) of cashbacks and price-discounts. Building on evaluability theory, we propose that the time-of-reward-accrual of promotion is hard-to-evaluate. Put simply, consumers find it hard to assess the duration of waiting time associated with receiving promotions. Consequently, consumers’ perceptions of cashbacks vis-à-vis price-discounts can be influenced by whether they evaluate both promotions simultaneously [joint-evaluation (JE) mode] or independently [single-evaluation (SE) mode].

Findings

The initial four studies show that the time-of-reward-accrual of promotions is hard-to-evaluate. Cashbacks appear just as appealing as price-discounts when consumers evaluate them independently (SE-mode) but lose their appeal when consumers view them alongside price-discounts (JE-mode). The next two studies further enhance the generalizability of our findings by replicating the observed effects for different purchase types (hedonic vs utilitarian) and varying promotional benefit levels (high vs low).

Originality/value

By shedding light on evaluations of time-of-reward-accrual of promotion, this paper adds a new dimension to research on promotions. The paper also extends the application of evaluability theory beyond domains such as hiring, fairness judgments and product bundle assessments. The paper presents evaluation mode as a boundary condition to explain contradictory predictions from prior research for consumers’ preferences for delayed vs immediate promotions.