You’re scrolling an online shopping site, when a pop-up appears offering a discount…but the clock is ticking. If you want to take advantage of the offer, you have to make a purchase now. We’ve all experienced the heart-racing adrenalin of chasing a great deal. How do they actually work?
Limited-time offers (LTOs), where products are temporarily discounted, are a widely used marketing tactic. Consumers may be familiar with Black Friday sales in the US or Singles Day sales in China–these are both examples of limited time offer sales. By creating a sense of urgency with a short-lived discount, the strategy aims to stop shoppers from continuing their search and push them to make a purchase quickly. In other words, LTOs are designed to influence consumer search behavior.
In a recent study published in the leading management and marketing journal Management Science, NYU Shanghai Assistant Professor of Marketing Huang Jin and collaborator Gong Zheng from The Chinese University of Hong Kong, Shenzhen, explore how competing firms use LTOs to influence consumer decisions and examine the broader implications of this practice.
There are two ways companies use limited time offers to influence consumers. First, consumers randomly visit a store or site they are interested in and check out the prices of things. The goal of the limited-time discount here is to discourage consumers from going elsewhere. In the second scenario, consumers could learn about LTOs in advance through advertisements, which influences the order in which they visit stores. This proactive strategy allows firms to shape consumer choices before they even leave home.
“Previous research has primarily focused on the first scenario, often concluding that such practices discourage consumer search and harm competition,” explains Huang. “Our study is the first to investigate the second scenario, where the search order itself becomes a strategic battleground for firms.”
The researchers found that LTOs are a powerful tool for attracting early visits from consumers. Confident brands tend to offer steeper, shorter-term discounts to capture attention quickly, while less confident brands may extend their offers to reach consumers who continue searching. This competitive behavior can lead to a more efficient search process, helping consumers discover higher-quality options sooner—and thus potentially improving both consumer and overall social welfare.
“We hope the findings offer valuable guidance for businesses aiming to refine their dynamic pricing strategies and for policymakers considering how best to regulate such practices,” says Huang. “Rather than assuming LTOs are always anti-competitive, it’s important to assess their effects within specific market contexts.”