Influence of Soldout Products on Consumers’ Choice1

Xin Gea, Paul R. Messinger

b, and Jin Li

c

aAssistant Professor, University of Northern British Columbia,

bAssociate Professor, University of Alberta,

cAssistant Professor, North Dakota State University,

ABSTRACT

Previous research on consumer choice has largely focused on how consumers

make purchase decisions given information about available products. However,

consumers often face situations in which information about soldout products is still

present in the decision context. We argue that soldout products convey special

information about the decision environment, and that consumers assimilate this

information when making their decisions. In particular, three experiments demonstrate

what can be called an immediacy effect, whereby soldout products prompt consumers to

expedite their purchases. Soldout products also influence consumers’ choice among

available options. Consumers may even actively search for information about soldout

products.

1This research was supported by the Social Sciences and Humanities Research Council of Canada,

and by faculty research grants from the University of Northern British Columbia and North Dakota State

University. For helpful suggestions, the authors would like to thank participants of the session ―Important

Consumer Behavior Issues in Retailing‖ in the 2007 Marketing Science Conference in Singapore.

2

Influence of Soldout Products on Consumers’ Choice

Seinfeld, Episode 119,

“The Sponge”:

ELAINE: Well, Kramer was right. My friend Kim told me the sponge is off the market.

JERRY: So what are you gonna do?

ELAINE: I’ll tell you what I’m gonna do – I’m gonna do a hard-target search. Of every drug store, general

store, health store and grocery store in a 25-block radius.

ELAINE (after much futile search, with little hope): Do you have any Today sponges? I know they’re off

the market, but…

PHARMACIST: Actually, we have a case left.

ELAINE (excited): A case! A case of sponges? I mean, uh…a case. Huh. Uh…how many come in a case?

PHARMACIST: Sixty.

ELAINE: Sixty?! Uh…well, I’ll take three.

PHARMACIST: Three.

ELAINE: Make it ten.

(... Then ELAINE goes for twenty, twenty-five, and finally…)

ELAINE: Yeah. Just give me the whole case and I’ll be on my way.

INTRODUCTION

Much of the existing literature examines how consumers process information

about available offers on the market and make a choice from among these options.

However, a phenomenon that has largely escaped research attention is that consumers

often face situations in which information about soldout products is still present in the

decision context. For example, advertisements of recently-sold houses or automobiles

often remain in newspapers for a period of time before being withdrawn, marked by a

soldout stamp in such a way that consumers can still examine the attribute information of

3

the alternatives if they desire to do so. Consumers browsing online clothing stores often

find out that clothes of certain styles, colors, or sizes of interest are sold out. Retailers in

consumer electronics sometimes even intentionally keep a model on display even after all

units of that model are sold out. Information about soldout products may, thus, be

available unavoidably (for instance, because of newspaper lead times or lags in changing

shelf facings or retail displays) or it may be intentionally kept available (as a form of

promotion). But in either case, such information often constitutes part of the decision

context, and it is incumbent on retailing practitioners to understand the impact of such

information on consumer choice. Towards this end, we examine in this paper some

features about how consumers make purchase decisions in the presence of soldout

products. In particular, we ask whether consumers ignore information about soldout

products in making choices, and, if not, how soldout products influence consumers’

choices.

A relevant question in this context is whether the presence of soldout products

reduces the incidence of the ―no-choice‖ option, i.e., the option to defer a decision

(Tversky and Shafir 1992; Dhar 1997). Rational choice theory remains silent with

respect to the influence of unavailable products on the incidence of the no-choice option.

Standard theory assumes that unavailable products do not affect the ratios of choice

probabilities associated with the available items (Luce 1959). By contrast, we suggest

that soldout products convey special information about the decision environment, and

that consumers actively process this information in a way that systematically influences

their preference for the no-choice option (as well as their choice from among the

available options).

4

The current research is motivated by two propositions. First, we propose that

soldout products make salient to consumers a time dimension in the decision environment

and cause consumers to pay attention to the flow of supply and demand, turning the

otherwise static decision scenario into a dynamic one. When consumers do not have a

reason to make an immediate purchase decision, they often decide to defer a choice by

choosing to search for information about additional options, or simply by choosing to

wait (Tversky and Shafir 1992; Dhar 1997). Research has also found that substantial

delay often exists between the recognition of need and the time of purchase (Greenleaf

and Lehmann 1995). As the Seinfeld episode at the beginning of this paper illustrates,

unavailability of a product provokes consumer’s attention to changes in product supply

and demand in the market, which in turn creates a sense of immediacy in making the

purchase decision, and even prompts the consumer to take extra effort to remove the

constraint on availability.

Second, we propose that soldout products provide a background context serving

as a reference point against which consumers evaluate the available options. An

abundance of work has demonstrated that consumers often form judgments of an option

not by its absolute value, but rather by its relative position compared with other market

offerings (Huber et al. 1982; Simonson 1989; Tversky and Simonson 1993; Wernerfelt

1995). Just as individuals rely on past prices as the reference price to make judgments

and choices of the observed offerings (Kalyanaram and Winer 1995), they also tend to

consolidate the information about the soldout product into their information set and use

the soldout products as the basis for considering the available options. We propose that

soldout products, thus, help consumers form a better understanding of the product

5

distribution and facilitate evaluation of the available options. The remainder of this paper

is organized as follows. We begin by reviewing the literature most relevant to

understanding and predicting the influence of soldout products on consumers’ choice.

We, next, propose a number of hypotheses, followed by the results of three experiments.

The first two experiments focus on the influence of a soldout product on consumers’

attitudes toward decision deferral, as measured by their choice of the no-choice option

versus the available options. The third experiment examines the shift in consumers’

choice among available options as a response to the soldout product. This experiment

also investigates consumers’ search behavior with respect to the information about

soldout products. We conclude with a discussion of the theoretical and practical

implications of the results.

SOLDOUT PRODUCTS AND CONSUMERS’ CHOICE

Whereas limited work has been directed at understanding the influence of soldout

products on subsequent consumer decision processes, the notion of unavailable options in

the decision environment has attracted previous research interest. Pratkanis and Farquhar

(1992) coined the term ―phantom alternatives‖ to refer to any choice options that are

unavailable at the time of decision making. A distinction can be made between known

phantoms, i.e., phantoms that are recognized as unavailable from the outset, and

unknown phantoms, i.e., those whose unavailability is initially unrecognized (Pratkanis

and Farquhar 1992; Farquhar and Pratkanis 1993). Examples of the former include

preannounced new products (Eliashberg and Robertson 1988) and past prices

(Kalyanaram and Winer 1995). Examples of the latter include fully booked hotels or

6

restaurants that consumers include in their consideration sets before the unavailability of

these products becomes clear. In a retail context, unknown phantoms can occur as a result

of stores’ conscious manipulation of the selling environment as is done with ―bait and

switch‖ tactics, in which stores advertise a product at extremely low price, and then

reveal to interested customers that the advertised product (the bait) is not available but a

substitute (the switch) is.

Previous research has examined different responses elicited by unknown

phantoms and known phantoms. If a phantom is not clearly identified as unavailable at

the outset, consumers may feel entitled to availability of the phantom as they go through

the decision process. As the unavailability is revealed at a later stage of decision making,

it can result in reactance, i.e., a feeling of deprivation and dissatisfaction (Fitzsimons

2000). In addition, when consumers perceive that availability of the unknown phantom

can be restored, reactance produces a motivation directed toward removing constraints on

obtaining the product (Brehm 1966). However, when consumers perceive that

unavailability of the unknown phantom can not be reversed, they tend to derogate the

attractiveness of the option or reduce the importance weightings given to the option’s

best attributes (Hammock and Brehm 1966; Clee and Wichlund 1980; Potter and Beach

1994). Furthermore, in the context of compliance technique, such as low-balling

procedure through which the influencer first recruits participants to perform a task by

indicating only a low level of cost, but then reveals much higher costs actually required to

complete the task (thus, participants’ original commitment is no longer a valid option and

becomes an unknown phantom), it has been demonstrated that participants tend to

7

escalate their commitment to performing the onerous task by complying to costs higher

than their expectation (Cialdini et al. 1978).

On the other hand, a known phantom has been shown to affect decision makers’

preferential judgments. In the same manner as consumers’ preference for an option is

contingent on the structure, or composition, of the offered set, unavailable options in the

decision environment can influence consumers’ relative preference for the available

options. Doyle et al. (1999) and Fitzsimons (2000) established the attraction effect in the

context of unavailable options. These researchers showed that the presence of a third

unavailable option that is clearly inferior to one of the existing options (but not the other)

leads to an increased choice incidence of the option that dominates the unavailable

option. In addition, Pratkanis and Farquhar (1992) demonstrated that, in an offered set of

two options (referred to as the target and the referent) that involve a tradeoff between two

attributes such that the target is superior to the referent on attribute 1, then the presence of

a phantom that is preferred to the target on attribute 1 leads to an increased weight

assigned to attribute 1, which in turn has the potential to result in an increased likelihood

of choosing the target. However, at the same time a comparison with the phantom makes

the target less attractive, a result in line with the attraction effect. The probability of

choosing the target is a function of the magnitude of the two competing processes.

In the current research, the soldout products are conceptualized as recognized

phantoms that are known from the outset to be unavailable (because, for example, the

product may be marked by a soldout stamp). In principle, the known unavailability may

reduce consumers’ feelings of commitment to these products in the decision process.

8

Even so, we propose that soldout products can produce significant changes in consumers’

choice.

The provision of information about soldout product can be viewed as a form of

market signaling. Market signals arise from information asymmetry between two parties

to a transaction about the characteristics of the marketplace (Kirmani and Rao 2000;

Spence 1974, 2002). Market signals, according to signaling theory, are often used by

sellers to convey information to consumers that the latter do not have easy access to but

desire to possess. For example, retailers might provide a low price guarantee to signal to

consumers the proximity of retailer’s offer price to the lowest market price (Dutta and

Biswas 2005; Biswas et al. 2006).

Whereas a seller knows that the demand for a product is relatively high compared

to the supply, consumers might lack that knowledge. To eliminate such information

asymmetry, a seller can present soldout products in order to signal to consumers the

otherwise unobservable information about market demand. This information allows

consumers to distinguish between a vibrant and a stagnant market. In a decision scenario

in which consumers fail to consider the dynamics of product demand and supply, they

often decide to take the ―no-choice‖ option, i.e., option to defer a purchase decision by

choosing to search for information about additional options, or simply by choosing to

wait (Tversky and Shafir 1992; Dhar 1997). With the soldout products signaling that an

offer might not last long on the market, consumers are more inclined to expedite their

purchase decisions by choosing an available option.

It is noteworthy that while perceived unavailablity can imply scarcity, which

might increase the desirability of an object (Lynn 1992), we argue that preference

9

elicitation by soldout products does not have to be an indispensable step toward the

choice of an object. With the soldout products serving as a cue to the relationship

between demand and supply that might be otherwise neglected in the decision process,

consumers tend to choose an available option without necessarily adjusting their

evaluation of that option. On the basis of this discussion, we offer the following

hypothesis:

H1: The soldout products will create an immediacy effect according to which the

presence of soldout products will prompt consumers to choose an available option

rather than defer their purchase decisions.

A considerable body of research focuses on the influence of the composition of an

offered set on people’s choice between the options in the set (Huber et al. 1982;

Simonson 1989; Tversky and Simonson 1993). A subset of this research examined the

attraction effect. As discussed earlier, recent advances in research have demonstrated the

robustness of the attraction effect by extending this effect to the context of unavailable

options (Doyle et al. 1999; Fitzsimons 2000; Pratkanis and Farquhar 1992). In this

research, we propose that the soldout products will influence consumers’ choice between

the available options through a related process—the compromise effect, i.e., an

alternative’s choice probability will increase when it becomes a middle option in the

product distribution.

Under preference uncertainty, such as when consumers are unfamiliar with the

decision situation, they might not know how to evaluate different market offerings. Under

such circumstances, a safe option for the consumer to choose appears to be the one that

the average consumer will choose. Wernerfelt (1995) argued that consumers who do not

10

know their absolute but only their relative tastes can infer the correct choice from market

offerings, based on an intuitive assumption that these reflect the distribution of tastes in

the population. Thus, consumers will consider the option in the middle range of the

product distribution a reasonable choice. However, consumers often only know that the

distribution of products comes from a certain family of distributions (e.g. normal

distribution), but may not know the exact shape of the distribution (e.g. mean and

dispersion). As the soldout products represent options that did exist in the marketplace,

they convey relevant information about more prices and assortment of the product

continuum. For example, when buying a house in an unfamiliar market, information

about the real estates that have been recently sold out helps to provide a more complete

picture of the market. Combining the information about the soldout products with that

about available options enables consumers to form a better understanding of the product

distribution. Specifically, the presence of extreme soldout products helps consumers to

estimate the precise location of the available options in the product continuum, serves as

the reference point to identify the available option that falls in the middle of the product

distribution, and facilitates consumers’ choice between the available options. In

conclusion, we propose that the compromise effect can be extended to the context of

soldout products, as follows:

H2: The presence of extreme soldout products enables consumers to identify the

available option that falls in the middle of product distribution and increases the choice

incidence of the middle option.

11

EXPERIMENT 1

The goal of Experiment 1 is to examine whether an immediacy effect is triggered

by a soldout product in the decision environment (as predicted by Hypothesis 1).

Method

Subjects. Seventy-eight undergraduate students in a subject pool participated for

partial course credit. They did so in a university research lab, and in groups of less than

fifteen per session.

Materials. All stimuli were presented on a computer screen, and participants

entered their responses using a computer mouse and keyboard. Participants were asked to

consider whether or not they would like to take advantage of a special offer of a ski pass.

Two ski pass alternatives were used in this experiment, one sold at $20 for 5 hours and

the other sold at $40 for 10 hours. One of the two ski passes was presented as the soldout

product, and the other as the available option. The selection of the soldout product was

counterbalanced. Each of the two ski passes was indicated as the soldout product 50

percent of the time (See Table 1).

Design and procedure. We used a one-factor, two-level, between-subjects design.

The key experimental manipulation consisted of the presence versus absence of a soldout

product. In the soldout condition, participants were presented with two ski passes, one of

which had a tag attached to it that read ―Sorry, Sold Out.‖ (See Table 1) Participants

were then asked to decide whether they would like to purchase the available option

(―Yes, I will purchase‖ vs. ―No, I will not purchase‖). In addition, participants were

12

asked to evaluate the attractiveness of the two options on a seven-point scale (where 1 =

not at all attractive and 7 = very attractive).

The absence-of-soldout condition was the control condition. Under this

condition, participants were only presented with the available option, which was the same

available product as in the soldout condition (See Table 1). Participants were asked to

decide whether they would like to purchase the product. In addition, participants were

asked to evaluate the attractiveness of this product.

Table 1: Experimental Stimuli in Experiment 1

Soldout condition Absence-of-soldout condition

Ski Pass 1: $20 (for 5 hrs)

Ski Pass 2: $40 (for 10 hrs)

– Sorry, Sold out

Ski Pass : $20 (for 5 hrs)

Or (counterbalancing case)

Soldout condition Absence-of-soldout condition

Ski Pass 1: $40 (for 10 hrs)

Ski Pass 2: $20 (for 5 hrs)

– Sorry, Sold out

Ski Pass : $40 (for 10 hrs)

Results

First, we compared the attractiveness rating data of the two ski pass alternatives in

the soldout condition. The mean rating of the alternative consisting of a 5 hour pass for

$20 was 4.00, and the mean rating of the alternative consisting of a 10 hour pass for $40

was 4.18, which is not significantly different (t (38) = -0.61, p = .55, two-tailed). Since

participants perceived the two ski pass alternatives as equally attractive, we conclude that

any differences in the tendency to expedite choice (i.e., select the available option) are

not due to perceived differences in attractiveness of the two alternatives.

13

Next, we tested whether the sample choice share of the no-choice option (i.e.,

option to defer the purchase decision) is different in the two experimental conditions

using a logistic regression within GLM analysis (generalized linear model) in R. The

share of the no-choice option vs. the available option as a function of whether the soldout

product is absent or present in the decision environment is presented in Figure 1. In the

absence-of-soldout condition, 64.1 percent (25 out of 39) of the participants selected the

no-choice option. In the soldout condition, 38.5 percent (15 out of 39) of the participants

selected the no-choice option, which is significantly smaller (z = -2.24, p = .01, one-

tailed). These results demonstrate that the presence of a soldout product creates a sense of

urgency which prompts consumers to make a purchase of the available options rather

than defer the purchase decision, a phenomenon we refer to as the immediacy effect.

Figure 1

Exp. 1: Choice Share of No-choice Option vs. Available Option

38.5%

64.1%61.5%

35.9%

0%

10%

20%

30%

40%

50%

60%

70%

Soldout Absence-of-soldout

Ch

oic

e S

har

e

No-choice Option

Available Option

Discussion

Unlike prior research that deliberately constructed the unavailable option to be

clearly inferior or superior to one of the available options so that it caused a preference

shift for the latter (Walster and Festinger 1964; Farquhar and Pratkanis 1993; Fitzsimons

14

2000, Study 3), our experiment involved a soldout product that was equally attractive as

the available option (by introducing the same unit price of an activity, i.e., $4/hour). The

purpose of introducing an equally attractive soldout product was to rule out the

possibility that a comparison with an inferior soldout product would provide a reason for

participants to choose an available option (as in Simonson 1989; Tversky and Simonson

1993). Rather, in this experiment we aimed to demonstrate the immediacy effect—i.e., a

tendency to choose an available option simply due to felt urgency triggered by the

soldout product, an effect independent of perceived value of the available option relative

to the soldout product.

We realize, however, that introducing an equally attractive soldout product leaves

open an alternative explanation, according to which consumers are following herd

behavior. That is, in Experiment 1, participants might decide to choose the available

option with greater frequency simply because they realize that other people have chosen a

very similar alternative, i.e., the soldout product.

Banerjee (1992) and Bikhchandani et al. (1992) independently proposed the

―informational cascades‖ framework to interpret herd behavior. They showed that when

individuals need to make decisions using incomplete or ambiguous information, they tend

to assume that other people hold more valuable information than themselves, and thus

infer product quality from other people’s choices. Thus, when participants felt uncertain

about the value of the available option, other people’s choice of a highly similar

alternative can become informative to the participants and increase their preference for

the available option. If this ―informational cascades‖ account of herd behavior holds, it is

15

expected that the presence of a soldout product should increase people’s evaluation of the

available option.

To examine the possibility of the information cascade argument, we compared the

attractiveness rating data of the available option in the two experimental conditions.

(Specifically, we compared the mean of the attractiveness ratings of the available options,

i.e., the 5 hour pass for $20 and the 10 hour pass for $40, in the soldout condition with

that in the absence-of-soldout condition. This differs from our earlier comparison of the

attractiveness ratings between the 5 hour pass for $20 and the 10 hour pass for $40, under

the soldout condition.) The mean rating of the available option in the soldout condition

was 4.18, and that of the available option in the absence-of-soldout condition was 3.51.

The difference between the two numbers is marginally significant (t (76) = 1.72, p = .09,

two-tailed). This analysis suggests that the presence of a highly similar soldout product

tends to increase people’s evaluations of the available option to some extent. Based on

these results, herd behavior, in principle, could account for the pattern of results in this

experiment, rather than (or in addition to) an immediacy effect, as suggested earlier.

However, the explanation of information cascades is more of an experimental

artifact as it is contingent on the condition that the soldout product and the available

option were highly similar, if not interchangeable alternatives, so that participants were

able to make inferences about the value of the available option by observing other

people’s choice of the soldout product. In the next experiment, we investigate whether

the soldout product can still generate a higher choice share of the available option even

when the soldout product is from a different product category than the available option.

16

EXPERIMENT 2

Experiment 1 showed greater choice share for the available option when a soldout

option was present, which could arise either from an immediacy effect or from an

information cascades effect, or from both. The goal of Experiment 2 is to examine

whether the immediacy effect by itself is sufficient to expedite consumers’ purchase

decisions. To isolate the immediacy effect from an information cascades effect, we

introduce a soldout product from a different product category than the available option.

The rationale behind this is that participants can not transfer other people’s preference for

a product to their evaluations of a product in a totally different category. Nonetheless, the

presence of the soldout product in the decision environment can instill a sense of urgency

by causing participants to pay attention to a potentially high demand for the available

option.

Method

Subjects. Seventy-five undergraduate students in a subject pool participated for

partial course credit. They did so in a university research lab, and in groups of less than

fifteen per session.

Materials. All stimuli were presented on a computer screen, and participants

entered their responses using a computer mouse and keyboard. Participants were asked to

consider whether or not they would like to take advantage of a special offer from a store

on campus. Two promotion items were used in this experiment, a $20 value gift card sold

at $16.50, and an $18 value bus tickets available at $15. One of the two products was

presented as the soldout product, and the other as the available option. The selection of

17

the soldout product was counterbalanced. Each of the two products was indicated as the

soldout product 50 percent of the time (see Table 2).

In this experiment, the soldout product and the available option were from two

different product categories. In this case, the soldout product conveyed no information

about other consumers’ preferences for an available option in a different category.

Therefore, any observed effect of the soldout product can not be attributed to the

influence of information cascades.

Design and procedure. The procedure was similar to that employed in Experiment

1. We used a one-factor, two-level, between-subjects design. The experimental

manipulation consisted of the presence versus absence of the soldout product.

In the soldout condition, participants were presented with two promotion items (a

$20 value gift card sold at $16.5, and a $18 value bus tickets sold at $15), one of which

had a tag attached to it which read ―Sorry, Sold Out‖ (See Table 2). Participants were

then asked to decide whether they would like to purchase the available option (―Yes, I

will purchase‖ vs. ―No, I will not purchase‖). In addition, participants were asked to

evaluate the attractiveness of the products on a seven-point scale (where 1 = not at all

attractive and 7 = very attractive).

The absence-of-soldout condition was the control condition, under which

participants were only presented with the same available option as in the soldout

condition (See Table 2). Participants were asked to decide whether they would like to

purchase this option. In addition, participants were asked to evaluate the attractiveness of

this option.

18

Table 2: Experimental Stimuli in Experiment 2

Soldout condition Absence-of-soldout condition

Promotion Item 1: $20 value gift card for

$16.50

Promotion Item 2: Ten bus tickets for a

total of $15 (Original price $18) – Sorry,

Sold out

Promotion Item: $20 value gift card for

$16.50

Or (counterbalancing case)

Soldout condition Absence-of-soldout condition

Promotion Item 1: Ten bus tickets for a

total of $15 (Original price $18)

Promotion Item 2: $20 value gift card for

$16.50 – Sorry, Sold out

Promotion Item: Ten bus tickets for a

total of $15 (Original price $18)

Results and Discussion

First, we compared the attractiveness rating data of the two promotion items in the

soldout condition. The mean rating of the gift card was 3.16, which was significantly

different from that of 3.84 of the bus tickets (t (36) = -2.73, p = .01, two-tailed),

indicating that participants assigned different evaluations to the two items that pertained

to different product categories.

In addition, we compared the attractiveness rating data of the available option in

the two experimental conditions. (Specifically, we compared the mean of the

attractiveness ratings of the available options, i.e., the $16.50 gift card and the $15 bus

tickets, in the soldout condition with that in the in the absence-of-soldout condition.) The

mean rating of the available option in the soldout condition was 3.57, and that of the

available option in the absence-of-soldout condition was 3.43. The difference between

the two numbers is not significant (t (73) = 0.32, p = .75, two-tailed). As expected, these

19

results demonstrate that the soldout product did not have an influence on participants’

evaluation of the available option.

Next, and most importantly, we tested whether the sample choice shares of the

no-choice option, i.e., option to defer the purchase decision, is different in the two

experimental conditions using a logistic regression within GLM analysis (generalized

linear model) in R. As shown in Figure 2, in the absence-of-soldout condition, 50.0

percent (19 out of 38) of the participants selected the no-choice option. In the soldout

condition, 27.0 percent (10 out of 37) of the participants selected the no-choice option,

which was significantly smaller than when a soldout product was absent (z = -2.02, p =

.02, one-tailed). Therefore, even when the soldout product pertained to a different product

category, it still prompted participants to expedite their purchase decision by accepting

the available option and rejecting the no-choice option.

These results suggest that the mere presence of a soldout product in the decision

environment tends to lead people to choose an available alternative. Whereas the

information cascades argument can provide an alternative explanation for Experiment 1,

it can not provide an alternative explanation for Experiment 2. In the latter experiment,

the soldout product is in a different product category than the available option, so the

soldout product is not informative of other people’s attitudes toward the available option

for participants to follow. But the soldout product can still create a sense of immediacy

and reduce the tendency to defer a purchase decision. Together, Experiments 1 and

Experiment 2 demonstrate that an immediacy effect is triggered by the presence of a

soldout product in consumers’ purchase environment. Thus, Hypothesis 1 is supported.

20

Figure 2

Exp. 2: Choice Share of No-choice Option vs. Available Option

27.0%

50.0%

73.0%

50.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Soldout Absence-of-soldout

Ch

oic

e S

ha

re

No-choice Option

Available Option

Experiment 3

The first two experiments demonstrated the immediacy effect of the soldout

product on consumers’ purchase decisions, whereby consumers are less inclined to defer

a purchase decision in the presence of a soldout product. The goal of Experiment 3 is to

investigate another important question: how the soldout product influences consumers’

choice among the available options.

An abundant body of research has been devoted to understanding the influence of

the composition of an offered set on consumers’ choice among the alternatives in the set,

i.e., how the preference for an alternative is dependent on the relative position of the

alternative compared with other alternatives in the offered set (Huber et al. 1982;

Simonson 1989; Tversky and Simonson 1993; Wernerfelt 1995). A subset of this

contextual influence is referred to as the compromise effect, which describes the

phenomenon that an alternative’s choice share will increase when it becomes a

compromise, or the middle alternative, following the introduction of an extreme

alternative into the offered set.

21

We propose that these findings can be extended to the decision environment with

a soldout product. When consumers face uncertainty in determining the absolute values

of available options, probably due to lack of experience or product knowledge, a safe

strategy to take is to choose a middle option from the product continuum that reflects

preferences of an average consumer (Wernerfelt 1995). Just as a more extreme option in

the offered set, a soldout product at a far end of the product distribution helps consumers

learn about prices and assortment of the market offerings, as well as learn the locations of

the available options in the product distribution. As a result, an extreme soldout product

helps consumers identify in the offered set the option that falls in the middle range of the

product distribution, and that corresponds to average preference. In this Experiment, we

test whether participants are more inclined to choose the middle option with the presence

of an extreme soldout product in the decision environment (as predicted by Hypothesis

2).

Method

Subjects. Two hundred and thirty one undergraduate students in a subject pool

participated for partial course credit. They did so in a university research lab, and in

groups of less than fifteen per session.

Materials. All stimuli were presented on a computer screen, and participants

entered their responses using a computer mouse and keyboard. Participants were asked to

consider purchasing a wine for a party. Three different wine alternatives were used in this

experiment: (1) 2004 Burgess Napa Merlot available at $5.99, (2) 2002 St. Jean Napa

Merlot available at $13.99, and (3) 2000 Chappellet Napa Merlot available at $21.99. The

22

first two wines were presented as available options, and the third, most expensive wine

was indicated as the soldout product (See Table 3).

Design and procedure. We used a one-factor, three-level, between-subjects

design. The key experimental manipulation consisted of the presence of a soldout

product, the absence of a soldout product, and the presence of a soldout product that is

initially not described explicitly, but concerning which participants can choose to search

for further information.

In the soldout condition, participants were presented with three wine options:

2004 Merlot available at $5.99, 2002 Merlot available at $13.99, and 2000 Merlot

available at $21.99. The third, highest priced alternative had a tag attached to it which

read ―Sorry, Sold Out‖ (See Table 3). Participants were then asked to decide which of the

two available options they would like to purchase (Wine 1 versus Wine 2). In the search-

of-soldout condition, participants were presented with the same two available wine

options as in the soldout condition. The third alternative had a tag attached to it which

read ―Sorry, Sold Out‖. However, the product description was hidden. In order to search

for information about the soldout product, participants need to click on a button that read

―Click here to view Wine 3‖ (See Table 3). If participants decided not to pursue this

information, they proceeded to make a choice between the two available options right

away. Otherwise, they clicked on the button, the information about the soldout product

was returned – yielding the same screen that those in the soldout condition were

presented with, and participants then made a choice between the two available options

given the description of the soldout product. The absence-of-soldout condition was the

control condition, under which participants were only presented with the two available

23

options, and were asked to decide which one they would like to purchase (See Table 3).

In all three conditions, all participants were asked to rate how knowledgeable they

considered themselves to be with wine after making a purchase decision (on a seven-

point scale where 1 = not at all knowledgeable and 7 = very knowledgeable).

Table 3: Experimental Stimuli in Experiment 3

Soldout condition Search-of-soldout condition Absence-of-soldout condition

Wine 1: $5.99 2004 Brugess

Napa Merlot

Wine 2: $13.99 2002 St.

Jean Napa Merlot

Wine 3: $21.99 2000

Chappellet Napa Merlot

– Sorry, Sold out

Wine 1: $5.99 2004 Brugess

Napa Merlot

Wine 2: $13.99 2002 St.

Jean Napa Merlot

Wine 3: Sorry, Sold out

Wine 1: $5.99 2004 Brugess

Napa Merlot

Wine 2: $13.99 2002 St. Jean

Napa Merlot

Note: After participants had clicked the ―Click here to view Wine 3‖ button, they were forwarded

to the same screen that those in the soldout condition were presented with.

Results and Discussion

The choice shares of Wine 1 versus Wine 2 as a function of whether the soldout

product is absent, present, or searchable in the decision environment are presented in

Figure 3. We tested whether the choice share of wine 2, the middle option in the product

distribution, was different across the experimental conditions using a logistic regression

within GLM analysis (generalized linear model) in R. In the absence-of-soldout

condition, 41.4 percent (29 out of 70) of the participants chose wine 2. The choice share

of wine 2 in the soldout condition was 68.9 percent (51 out of 74). As expected, with

presence of an extreme soldout product, participants were more likely to choose the

available option that fell in the middle of the product distribution (z = 3.27, p < .001, one-

tailed). In the search-of-soldout condition under which participants need to make a

Click here to view Wine 3

24

decision as to whether or not search for the information about the soldout product, the

overall choice share of wine 2 was 66.7 percent (58 out of 87). While the choice share of

wine 2 in this condition was not different from that in the presence-of-soldout-condition

(z = -0.31, p = .76, two-tailed), it was significantly greater than that in the absence-of-

soldout condition (z = 3.13, p < .001, one-tailed). These results suggest that when the

information about an extreme soldout product was available in the decision environment,

participants were more inclined to choose the middle option. Just as adding an end

alternative to the offered set, providing information about an extreme soldout product can

cause the compromise effect in consumers’ choice between the available options.

More interestingly, in the search-of-soldout condition, the majority of participants

actively sought to incorporate the information about the soldout product rather than

simply ignored this information in their decision process. 70.1 percent (61 out of 87) of

the participants in this condition chose to search for information about the soldout

product before making a purchase decision. Among these participants, 73.8 percent (45

out of 61) chose wine 2. For participants who decided not to search for this information,

Figure 3

Exp. 3: Choice Share of Wine 1 vs. Wine 2 (the Middle Option)

31.1% 33.3%

58.6%

68.9% 66.7%

41.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Soldout Search-of-soldout Absence-of-soldout

Ch

oic

e S

ha

re

Wine 1

Wine 2

25

50.0 percent (13 out of 26) chose wine 2. Actively pursuing and processing the

information about the soldout product significantly increased the choice incidence of

wine 2 (z = 2.12, p = .02, one-tailed). Furthermore, when making a purchase decision,

those participants who chose to pursue the information about the soldout product in fact

processed the same information as that in the soldout condition (in both cases,

participants processed information about the available options as well as the soldout

product); and the participants who chose to ignore the information about the soldout

product faced the same information as that in the absence-of-soldout condition (in both

circumstances, participants only processed information about the available options). An

analysis showed that, as expected, the choice share of wine 2 among participants who

chose to pursue the information about the soldout product was not different from that in

the soldout condition (z = 0.62, p = .54, two-tailed), and neither was the choice share of

wine 2 among participants who chose to ignore the information about the soldout product

from that in the absence-of-soldout condition (z = 0.75, p = .45, two-tailed).

Lastly, participants’ overall self-evaluation of their knowledge of wine was

modest (mean = 2.68, standard deviation = 1.62), indicating that, in general, participants

did not have adequate knowledge to assess the value of different wine options. The mean

ratings of knowledge were 2.89, 2.63, and 2.53 in the soldout condition, the absence-of-

soldout condition, and the search-of-soldout condition, respectively. There is no

significant difference in the mean ratings across the three experimental conditions

(F (2, 228) = 1.05, p = .35). Neither does any of the pair-wise comparisons suggest a

difference (p > .17). Moreover, we compared the mean ratings of knowledge between the

two groups who chose to pursue versus ignore the information about the soldout product

26

under the search-of-soldout condition. For participants who searched for the information

about the soldout product, the mean rating of knowledge was 2.26, and for participants

who ignored this information the mean rating was 3.15. Those who chose to ignore the

information about the soldout product gave a higher rating of knowledge than their

counterparts who chose to pursue this information before making a purchase decision

(t (85) = 2.27, p = .03, two-tailed). Thus when consumers do not have adequate product

knowledge, they tend to actively pursue and assimilate information about the soldout

product in their decision making. This finding supports the contention that in face of

decision uncertainty, information about soldout products can be used to provide a better

understanding of the product distribution, against which consumers evaluate the available

options.

To sum up, the findings of Experiment 3 support Hypothesis 2. Experiment 3

extended the well-documented compromise effect to a decision environment that involves

an unavailable product. These findings challenge marketers to reconsider the scope of

conditions under which the compromise effect might arise. It also expands the range of

marketing promotions and product positioning that could make use of the compromise

effect.

CONCLUSION

We have shown that the presence of soldout products is an important part of a

consumer’s decision context. Soldout products increase consumers’ sense of immediacy

to make a purchase and systematically influence their choice among available options. In

Experiment 1, the presence of a soldout product very similar to the remaining alternative

leads to much higher purchase incidence (and much smaller incidence of the ―no choice‖

27

option), other things being equal. In Experiment 2, the presence of a soldout product in a

totally different category of merchandise still leads to much larger purchase incidence of

the available option, other things being equal. In Experiment 3, consumers show a

significant tendency to seek out information about soldout products, and the information

they obtain helps them form an idea of the product distribution in a way that extends

known results concerning choice set effects where consumers are averse to extreme

alternatives.

These conclusions differ from early work on stockout products and phantom

alternatives. That work considered consumer dissatisfaction with stockouts and how

phantom products may induce an attraction effect (as suggested by Fitzsimons 2000 and

Pratkanis and Farquhar 1992). We go beyond that work in three ways. First, we consider

how soldout products can induce a decision to purchase (instead of the ―no choice‖

option). We refer to this as the ―immediacy effect‖ of soldout products. Second, we

consider one implication of soldout products for consumer search behavior. Namely, we

show that consumers may actually seek out information about soldout products as input

into actual choices from among available product alternatives. Thus, the consumer

search process may be thought of as including information about soldout, as well as,

available products. Lastly, we show that the impact of soldout products is not limited to

the attraction effect, discussed in early work, but also can evoke a compromise effect

when the soldout product constitutes an extreme alternative.

It is also interesting to consider the immediacy effect in relation to the shopping

momentum effect as proposed by Dhar et al. (2007). The idea of the latter is that once a

consumer has purchased an initial product (referred to as the driver), she will get into a

28

shopping mode and increase her purchase probability, rather than choose a ―no-choice‖

option, of a second product (referred to as the target). Compared to this work, which

demonstrates intra-personal changes in the purchase of the target, the current work

suggests that the behavioral change in purchasing a product can even be triggered by

inter-personal factors. The immediacy effect implies that to propel a consumer to

purchase the target product, the driver product does not necessarily need to be purchased

by the same consumer. To the extent that the consumer has the knowledge that the driver

product is sold out to other people, she tends to take actions to purchase the target

product.

These implications of soldout products have important practical applications in

several domains, including (a) in-store merchandising and retail advertising, (b) real

estate promotions, (c) online retailing, (d) physical and online auction environments, and

(e) personal selling. In these domains, indicating to potential customers that some

products are soldout can create a sense of immediacy for the customers to purchase one

of the available products.

At one level, this paper, together with the work of Fitzsimons (2000), suggests

pitfalls that marketers should avoid. The latter work indicates that consumers respond

with dissatisfaction when an inventory item is ―stocked out.‖ This coincides with

conventional wisdom among retailing practitioners that a stockout communicates to

consumers a lack of commitment to a category. On the other hand, if the reason for

running out of an item is framed, not as a problem with inventory management, but as a

result of product uniqueness or scarcity, then the current paper suggests that the

inferences on the part of the consumer are much more positive – that the product is

29

unusually desirable and that the consumer needs to act quickly as a consequence. Taken

together, the current paper and that of Fitzsimons (2000), thus, suggest important nuances

for practitioners concerning communications, merchandising, and personal selling.

Indeed, a stockout might compel a consumer to defer the decision until the item is ―in

stock,‖ whereas a soldout product conveys a sense of immediacy to make the decision

now while some items are still available.

At another (more proactive) level, the results of this paper suggest how

advertisers, retailers, and salespeople can influence the information environment to create

a sense of immediacy to ―close‖ a sale. It is important not to ―scare‖ consumers off from

investing time to learn about a product early in the decision making process. But later,

once consumers show interest, making consumers aware that similar or related products

are selling out may induce consumers to act now. These are intuitive applications,

perhaps reflecting just good ―salesmanship‖, known instinctively by many practitioners.

We provide support for such practitioner intuition. Indeed, understanding the sequence of

how information about soldout product is made available to consumers constitutes an

interesting area of future inquiry.

An example of a company that uses soldout items in a positive way is the rapidly

growing activewear retailer, Lulu Lemon, recently acquired by Nike. The sales staff

indicates directly that soldout SKUs (stock keeping units) are inevitable for certain

products; that some patterns, colors, and styles change rapidly; and that if consumers find

some unusual item on the shelves that they really like, then they should buy the item

NOW.

30

From a theoretical standpoint, the ideas in this paper can be further extended in

the area of information search. We have examined how soldout products influence

choice, but they also influence search behavior, as noted in Experiment 3. Whereas

previous research on consumer information search only focuses on the factors that

influence consumers’ search behavior with respect to available options in an offered set

(e.g., Ratchford and Srinivasan 1993; Moorthy et al. 1997), the current work presents

evidence that consumers also actively pursue information about products that are sold out

and combine this with information about available options. Our paper suggests that

researchers in marketing need to broaden their attention to issues such as how search for

information about soldout products and available options is consolidated, when and to

what extent consumers engage in information search about soldout products, etc. Further

work on how soldout products influence search behavior, thus, is warranted.

Overall, we look forward to further research on the implications of soldout

products for decision and information search, and on implications for advertising,

retailing, and personal selling.

31

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