The Conditional-Promotion Paradox: How Conditional Discounts Hurt Total Sales

Journal of Marketing Research Scholarly Insights are produced in partnership with the AMA Doctoral Students SIG – a shared interest network for Marketing PhD students across the world.

Conditional promotions—discounts that apply only when customers meet a specified requirement—are widely used in marketing. Marketers often assume that these promotions boost product sales by incentivizing customers to spend more. However, these promotions may not always increase sales.

Imagine this scenario: you have been considering buying a new smartphone that typically costs $1,000. You then discover a conditional promotion offering $700 off, but only if you activate a new two-year service plan. Although the discount seems attractive, the requirement to start a new line and commit to a two-year contract feels too costly and inconvenient. You could not take advantage of this discount. In the meantime, knowing that you could save $700 makes paying the full price seem even more unpleasant. As a result, you walk away and decide not to purchase it. In this situation, the conditional promotion ends up hurting sales. Therefore, understanding when and why conditional promotions make customers less likely to purchase the promoted product and reduce total sales is important for marketers.

A recent Journal of Marketing Research study by Andong Cheng and Ashley Stadler Blank explores this phenomenon. In this research, they investigate the conditions under which promotional efforts reduce total sales of a promoted product rather than boosting them, a phenomenon they call the “conditional-promotion paradox.” Across five studies using mixed methods, including secondary data, field data, and lab experiments, the authors demonstrate that conditional promotions backfire when paired with a high precondition cost and a large discount. This is because the high requirement prevents shoppers from taking advantage of the deal, and the large discount reduces their transaction utility, deterring them from purchasing the product at the regular price and ultimately reducing total sales of the promoted product. Continuing to offer conditional promotions without considering potential backlash—such as declining sales—could pose problems for firms.

The high requirement prevents shoppers from taking advantage of the deal, and the large discount reduces their transaction utility, deterring them from purchasing the product at the regular price and ultimately reducing total sales of the promoted product.

What Can Firms Do?

To maximize the benefits of promotions, marketers should minimize the cost of preconditions (e.g., minimizing the number of items consumers are required to purchase in a deal). Furthermore, marketers could target consumers who can easily meet the precondition requirements, as these individuals are more likely to make purchase decisions driven by the discount. This approach also helps avoid disappointing consumers who are unable to take advantage of the offer, thereby protecting overall sales performance.

We were honored to contact the authors to learn more about their study and gain additional insights.

Q: Your research uncovers the conditions under which conditional promotions can decrease sales rather than boost them. How did you first notice or suspect that this counterintuitive effect might be happening in the real world? Could you share whether there was a particular incident or observation that inspired you to explore this?

A: We were both struck by personal experiences in which conditional promotions actually made us less likely to purchase the promoted product. For example, Andong stopped by a Rite Aid to pick up laundry detergent. Tide was advertised as discounted for store members, but because she wasn’t a member (and wasn’t interested in signing up), she ended up buying another brand. Ashley had a similar experience when shopping for a new iPhone. The phone was available at a steep discount, but only if she activated a new line of service for two years. She didn’t want to commit to that precondition, yet after seeing the discounted offer, paying full price no longer felt like a good deal, so she decided not to purchase the iPhone at that time. These experiences highlight the conditional-promotion paradox—when promotions designed to enhance total sales of the promoted product end up reducing them. While much of our work originates from identifying gaps in the literature, this real-world phenomenon sparked our research into when and why conditional promotions can backfire.

Q: Could you share any notable experiences—whether challenging or particularly interesting—that you encountered while conducting both the field and lab studies, especially in partnership with real-world firms?

A: For our field study, securing a retail partner was surprisingly challenging. Before our bakery partner agreed to run a conditional promotion in their store, several other retailers declined. Many feared that offering a conditional promotion, particularly for a popular product, might harm sales. Interestingly, this hesitation mirrored the very phenomenon we were studying. In our paper, we argue that most managers expect conditional promotions to increase sales of the promoted product (which we confirmed in two pretests). Yet some of the more seasoned store owners we approached appeared to recognize that not all promotions are beneficial—that, under certain conditions, they can backfire. Their reluctance to participate provided an early, real-world glimpse of the conditional-promotion paradox our research ultimately confirmed.

Q: How might the boundary conditions of the conditional-promotion paradox extend to contexts like subscription services, such as promotions that offer “50% off your first 3 months when you sign up for an annual plan,” where consumers regularly engage with minor preconditions or recurring rewards? Do you think the conditional-promotion paradox could appear in these settings, too?

A: In this example, the precondition is signing up for an annual plan, and the discount is 50% off your first three months. If consumers perceive both the precondition cost and the discount as high, we expect the conditional promotion paradox to emerge.

Q: The research suggests that marketers should reduce the precondition cost as much as possible to avoid the conditional-promotion paradox. However, many promotions aim to signal exclusivity—offering benefits only to “loyal” or select consumers. Could lowering the precondition cost undermine that sense of exclusivity or reduce the perceived value among these targeted segments?

A: Whether lowering the precondition cost undermines exclusivity depends largely on how much value the firm derives from different consumer segments. A high precondition cost can help maintain a sense of exclusivity and strengthen loyalty among core customers, but it may also alienate other consumers who are unwilling or unable to qualify and who might disengage from the brand altogether. If the firm is less concerned about losing these other consumers, then maintaining a high precondition cost and communicating it broadly may be acceptable. One practical solution we highlight in the paper is selective communication. Rather than reducing the precondition itself, firms can limit who sees the promotion. For example, a company might email the offer only to loyal or qualified consumers in its database. This approach preserves the perception of exclusivity while minimizing the risk that other consumers—who can’t take advantage of the promotion—will experience reduced transaction utility or diminished interest in the brand.

Q: Given that conditional-promotion preconditions can take many forms (e.g., spending thresholds or loyalty requirements), what practical indicators or decision guidelines can help marketers determine when a conditional promotion is likely to hurt sales rather than help them?

A: Before launching any promotion, firms should carefully evaluate both the precondition cost and the discount. The key question is how many consumers will be encouraged versus discouraged by the combination of these two features. Across our studies, we found that conditional promotions with a high precondition cost and a high discount were most likely to decrease total sales relative to no promotion, because the precondition cost deterred consumers from purchasing the promoted product during the promotion, and the discount deterred them from purchasing it at the regular price. In contrast, conditional promotions with a low precondition cost and a high discount were most likely to increase total sales. Importantly, marketers should assess these two elements together before deciding whether a conditional promotion is likely to help—or hurt—sales.