Cashback Is Cash Forward: Delaying a Discount to Encourage Future Spending
40 Pages Posted: 3 Apr 2015 Last revised: 12 Mar 2018
Date Written: March 9, 2018
This paper examines purchase behavior in cashback shopping—a novel form of price promotion online where consumers initiate purchases at the website of a cashback company and, after a significant delay, receive the savings promised to them. We analyze panel data from a large cashback company and show that, over and above the predictable effect of cashback offers on initial demand, the later cashback payments further induce and increase future spending through the website. Specifically, at the average values in the data an additional $1.00 in cashback increases the likelihood of a future purchase by 0.02% and spending by $0.32. We consider three explanations for these effects, and the leading hypothesis is that consumers fail to treat money as a fungible resource. Finally, we discuss the implications of our findings for cashback companies and retailers.
Keywords: Cashback shopping, electronic commerce, sales promotion, pricing
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