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Mobile Promotions Can Increase Unplanned Spending

February 05, 2013

Retailers may want to coax consumers to embrace mobile promotion strategies: A Drexel LeBow researcher has found that using targeted promotions via mobile devices can be an effective way to get shoppers to cover more ground in a store, which leads to an increase in unplanned spending. 

Yanliu Huang, Ph.D., an assistant professor of marketing, says “Location-based mobile apps could be used very effectively to deliver specifically targeted promotions that would increase shoppers’ in-store travel distances, and hence unplanned spending. Based on our findings, retailers should consider using these targeted promotions.”

Huang and three fellow researchers conducted their research by tracking shoppers using RFID (radio frequency identification). Their paper, “The Effect of In-Store Travel Distance on Unplanned Spending: Applications to Mobile Promotion Strategies,” has been accepted for publication in the top-tier Journal of Marketing.

The study suggests that strategically promoting three product categories via mobile promotion may increase unplanned spending by 16 percent, and that a coupon that required shoppers to travel farther from their planned path resulted in a substantial increase in unplanned spending ($21.29) versus a coupon for an unplanned category near their planned path ($13.83).

Huang explains how this might work in a real world application: “Shoppers would check-in at a store once they enter the store using a service like Foursquare, and enter a list of product categories that they plan to buy using a grocery app, such as Grocery IQ, that partners with the retailer. Then, based on their planned shopping list, the grocery app would provide targeted offers to the shopper via smartphone, and these promotions might be for categories that are far away from planned product categories, with the goal of maximally increasing the length of the shopper’s reference path and unplanned buying.”

Huang says the use of RFID was crucial to the accuracy of their findings. The tags, which were attached to the shoppers, emitted a radio frequency signal every five seconds, which was then picked up by antennas at the perimeter of the store. “This allowed us to track shoppers’ locations. We know how far the shoppers traveled in the store, how fast they walked, how often they slowed down and what products they stopped in front of.”

“We are very happy that this paper was accepted by the Journal of Marketing, which acknowledged the importance and the value of our work in the field,” Huang says. “Hopefully the paper will have an impact in both academia and practice in the near future.” The paper has also been selected as a candidate for the American Marketing Association’s publicity program.

Huang’s coauthors on this paper are Sam Hui, Jeff Inman and Jacob Suher.

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