Approaches and tools for managing customer interactions have evolved rapidly over the last two decades. Among these emerging technologies, branded mobile applications and mobile optimized websites (“mobile apps”) used on smartphones and tablets are changing the ways in which customers interact with brands.
Previous research on mobile marketing, however, has focused on a one-way relationship between mobile use and outcomes such as purchase. We posit that the relationship is more complicated and multidimensional. The dynamic inter-relationship between customer mobile engagement, purchase, and consumption behaviors can be conceptually mapped as an interactive triangular relationship (see Figure 1).
Using a mobile app certainly exposes customers to a brand and thereby increases the likelihood of purchase and use of the service, but the relationship could go the other way as well: a customer who uses a service and derives value from it may seek out the app and use it. Therefore, the main objective of our study is to examine how consumer engagement behaviors (CEB) with a mobile app and purchase/consumption behaviors influence each other over time. To achieve this objective, we utilize a dataset sourced from LoyaltyOne in Canada. Each member enrolled in the program is provided a membership card that can be swiped at various sponsors across a number of categories, including grocery stores, petrol stations, drug stores, home improvement stores, and financial services.
LoyaltyOne also developed a branded mobile app, which allows customers to undertake specific consumer engagement behaviors, including logging-in to check their point balances, browse potential reward items, keep track of their purchase
histories and progress toward the attainment of particular rewards, find sponsors nearby, and check-in at sponsors. Consumers can share their check-in information on specific social networking sites (e.g., Facebook), helping to inform their family and friends where they shop or to keep a record of specific locations they have visited.
To incorporate the three different behaviors into our model, we first compute two measures of consumer engagement behaviors, namely the frequency and recency of customers’ usage of the app. We also calculate the total number of points accumulated each week by a customer as a measure of purchase behavior and the total number of points redeemed each week by a customer as a measure of consumption behavior. We then employ a vector autoregressive (VAR) model to account for the dynamic nature of interactions between the variables studied.
Overall, our findings suggest that the emerging brand touch point of mobile apps provides a powerful tool for fostering customer engagement behaviors that influence marketplace outcomes such as purchase behavior.
Specifically, based on our findings, engaging customers with mobile apps represents not only a viable revenue generating opportunity, but also a way to reduce advertising and promotion costs. Savings accrue because the firm does not buy advertising media and instead utilizes its branded app to control the medium, grow its audience, and co-create and distribute content. Nor must the firm reduce its margins through promotional tactics.
Hence, despite the upfront investment required for the development of the mobile app, our findings show that the introduction of branded mobile apps is an effective tactic that fosters the development of desirable consumer engagement behaviors and other ensuing behaviors, including point accumulation and redemption, thus contributing to the development of customer brand loyalty and lifetime value. As such, the introduction of branded mobile apps represents a “game changer” for marketing communications.
This research was adapted and abridged from an original paper by Viswanathan, V., Hollebeek, L. D., Malthouse, E. C., Maslowska, E., Jung Kim, S. and Xie, W. published in Service Science 9 (1) (2017) 36-49.
Written by Vijay Viswanathan Associate Dean at Northwestern Medill IMC
Edited by Dongmin Ren, Medill IMC Class Of 2018