The Effects of Mobile Apps on Shopper Purchases and Product Returns
Unnati Narang and Venkatesh Shankar, 2017, 17-100-01
In recent years, the penetration of mobile devices has reached unprecedented levels. In particular, mobile apps are increasingly dominating mobile device use. Despite the widespread use and the potentially significant effects of mobile apps and different app features, their consequences have been underexplored. Not much is known about how app adoption affects the net monetary value of purchases after accounting for product returns.
In this research, Unnati Narang and Venkatesh Shankar reveal new insights about the effects of mobile app adoption on shopping behavior across channels. They study a rich set of managerially important outcomes, such as individual purchase incidence and amount and product return incidence and amount. They use a large-scale dataset from an omnichannel retailer of video games, consumer electronics, and wireless services with 30 million shoppers. This unique dataset identifies individual app adoption date and allows the authors to isolate the effects of the app using a difference-in-differences regression.
Webinar with Venkatesh Shankar, Texas A&M University
January 11, 2017, 1 p.m. EST
The research reveals that app adopters buy 21% more often but spend 12% less per purchase occasion and return 73% more often than non-adopters after adoption. Overall, app adoption results in a 24% increase in net monetary value of purchases. In monetary terms, the retailer’s net annual revenue increase due to app launch ranges from $550 million to $890 million. An analysis of app features used by the shoppers reveals the key role of offer- and rewards-related features. Surprisingly, the number of unique app features accessed by the shopper has an inverted U-shaped relationship with shopping outcomes, suggesting managerial caution against “all-in-one” app designs.
Their study offers five key managerial implications. First, the estimates provide a useful benchmark for managers to evaluate any app introduction decision. Second, their finding that purchase frequency is higher but monetary value per occasion is lower for app adopters suggests that managers should plan for shoppers visiting the physical and online stores more often and spending less on each occasion. These findings imply that the key task of sales associates is to encourage shoppers to visit again.
Third, the finding that app adoption leads to greater product returns exposes managers to a darker side of apps. Managers need to proactively monitor return incidence from app adopters and devise interventions to keep product returns in check. Fourth, the findings on app feature usage suggest that managers need to ensure that interactive features such as redeeming reward points and activating offers are easily accessible. Finally, the authors caution managers against an all-in-one app design and in favor of a more thoughtful combination of app features to avoid information overload. Managers should adapt their mobile app design strategies to their context, including the product category.
Unnati Narang is a Ph.D. student in Marketing and Venkatesh Shankar is Professor of Marketing and Coleman Chair in Marketing and Director of Research, Center for Retailing Studies, at the Mays Business School, Texas A&M University.
The authors thank participants at the 2016 Theory and Practice in Marketing (TPM) Conference and the 2016 Professors’ Institute meeting of Marketing EDGE for valuable comments.
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