The Effectiveness of Individual Targeting Through Smartphone Application in Retail : Evidence from Field Experiment

Smartphone applications are becoming an important marketing channel that allows to build long-term relationship with customers. The main advantage of advertising through this kind of media is an opportunity to individually target users with different offers, taking into consideration their characteristics and purchase history. However, little is known about the effectiveness of such practice. We use a purely randomized natural field experiment with 11338 customers of large Russian retail chain to understand factors that influence the effectiveness of advertising through smartphone application. We find that the impact of conducted advertising campaign either on number of purchases or purchase amount is slightly negative on average. While most previous studies report positive effect of advertising through mobile devices, we can explain the average negative effect by influence of small discount (less than 20%) offers on consumers' behavior. Holiday text of the message makes this effect even stronger. Consistent with the literature, the average effect of advertising depends on RFM characteristics of customers. However, the loyalty of consumers or different texts of an advertising message do not affect the effectiveness of advertising via mobile application. These results can help a retail chain to elaborate rules for individual targeting that assure more profits