How
Smartphone Apps Influence the Way We Shop
Bottom
Line: Consumers who use mobile apps tend to
make more-frequent purchases, spend less per transaction, and return items more
often than those who don’t.
It’s
hard to overestimate the impact smartphones have had. They’ve fundamentally
transformed the way we interact with friends and colleagues, consume media, and
live day-to-day. But despite their ubiquity — roughly 2 billion people around the world use a smartphone
and it’s thought that more than 70 percent of the global population
will own one by 2020 — there is plenty we don’t know about how they have
changed our behavior.
Take
shopping. Some of the attributes that make a smartphone appealing —
portability, interactivity, and location awareness — also make it the ideal
shopper’s companion. Studies have shown that more than 80 percent of U.S.
shoppers turn to their phones for help. With the swipe of a thumb, consumers
can access product descriptions, reviews, and price comparisons, upending much
conventional wisdom about how marketers should lure customers.
U.S.
companies spent more than $28 billion on mobile advertising in 2015
and are set to double that by 2018. Much of this outlay is aimed at users of
mobile apps, which account for about 87 percent of people’s smartphone usage.
A
new study seeks to isolate the effects of mobile apps on some
important retail metrics, including how much each customer spends, the number
of products they return, and the relationship between various app features and
purchase decisions.
The authors obtained data from a large,
U.S.-based retailer of consumer electronics, video games, and wireless
services. In addition to transaction-related records from the chain’s 4,175
stores and its website, the authors also examined data on the more than 2
million customers — among the company’s 32-million-strong customer base —
who adopted the mobile app.
In an attempt to generate traffic both online
and in stores, the company launched an app that allows users to browse its
catalogue; see special deals and promotions; visit the website; and view store
hours, locations, and driving directions. The authors’ data spanned from the
month of the app’s inception, July 2014, through June 2015, and enabled them to
gather the number and monetary value of all purchases and returns.
The analysis showed that, compared with
non-adopters, people who used the app bought products 21 percent more
frequently in the month after they downloaded it, but spent 12 percent less per
purchase. They also returned items 73 percent more often than people who didn’t
use the app. Although app users spent less per purchase than did non-users,
they still spent more in aggregate because they made more purchases: Overall,
app adoption resulted in a 24 percent increase in the net monetary value of the
purchases made.
Why do
app users make more purchases? The app features may provide the answer. People
most commonly used the features related to special offers (for example,
clicking for a deal on a particular product) and loyalty rewards (checking up
or cashing in on the points they’ve accrued). These features, the authors note,
are highly interactive. As others have observed, people have embraced smartphones so eagerly, in part,
because the interactivity gives users a feeling of control and the sense that
they’re experiencing the world around them through their technology. Activities
such as redeeming reward points and responding to special deals play right into
this psychological phenomenon. Higher engagement with the interactive features
of an app is likely to make people buy things more often.
Part of the reason app users spend less per
purchase, the authors note, is because so many of them are drawn to these
discount-laden interactive features. Indeed, consumers who did not use the
app’s special offers or loyalty programs spent roughly the same amount before
and after downloading the app, but those who did use these interactive features
spent 16 percent to 20 percent less per average purchase. The authors also
examined how people used apps the day before and the day of a purchase.
If the increased exposure to offers and
rewards helps explain why consumers who use apps tend to make more purchases,
it also partly accounts for their higher returns, the authors posit. Purchases
made through an app rather than in-store may be more impulsive, and people
tapping a button may feel less inhibited than they would if they had to wait in
line at a register and physically hand over cash or a credit card. This can
lead to a higher rate of buyer’s remorse, the authors suggest.
Further, many returns probably stem from the
disconnect between the product the consumer expects and the one that actually
shows up on their doorstep. So the authors advise retailers to provide clear
pictures, videos, and descriptions of products on their app.
The authors also suggest that, with the scope
of information available in the palm of a shopper’s hand, interacting with
salespeople or online agents may be less important than it used to be, meaning
the key job for sales associates should be to make the shopper’s experience as
quick and efficient as possible and then encouraging them to visit again.
Source: “The
Effects of Mobile Apps on Shopper Purchases and Product Returns,” by Unnati Narang and Venkatesh Shankar (both Texas
A&M University), Mays Business School Papers, Dec. 2016
Matt Palmquist
http://www.strategy-business.com/blog/How-Smartphone-Apps-Influence-the-Way-We-Shop?gko=8703e&utm_source=itw&utm_medium=20170124&utm_campaign=resp
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