How Targeting Affects Customer Search: A Field Experiment

34 Pages Posted: 2 Jul 2012 Last revised: 12 Jan 2016

Nathan M. Fong

Temple University - Department of Marketing and Supply Chain Management; MIT Sloan School of Management

Date Written: January 11, 2016

Abstract

It has become common practice for retailers to personalize direct marketing efforts based on customer transaction histories as a tactic to increase sales. Targeted email offers featuring products in the same category as a customer's previous purchases generate higher purchase rates. However, a targeted offer emphasizing familiar products could result in curtailed search for unadvertised products, as a closely matched offer weakens a customer's incentives to search beyond the targeted items. In a field experiment using email offers sent by an online wine retailer, targeted offers resulted in decreased search activity on the retailer's website. This effect is driven by a lower rate of search by customers who visit the site, rather than a lower incidence of search. There are several ways this could potentially hurt retailers and consumers, such as reduced cross-selling and fewer opportunities for customers to explore new products.

Keywords: targeted marketing, customer search, personalization

JEL Classification: D83, M31

Suggested Citation

Fong, Nathan M., How Targeting Affects Customer Search: A Field Experiment (January 11, 2016). Available at SSRN: https://ssrn.com/abstract=2097495 or http://dx.doi.org/10.2139/ssrn.2097495

Nathan M. Fong (Contact Author)

Temple University - Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/site/nmfong/

MIT Sloan School of Management ( email )

Cambridge, MA
United States

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