Cashback Is Cash Forward: Delaying a Discount to Encourage Future Spending

40 Pages Posted: 3 Apr 2015 Last revised: 12 Mar 2018

See all articles by Prasad Vana

Prasad Vana

Tuck School of Business at Dartmouth

Anja Lambrecht

London Business School

Marco Bertini

ESADE - Ramon Llull University

Date Written: March 9, 2018

Abstract

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

Suggested Citation

Vana, Prasad and Lambrecht, Anja and Bertini, Marco, Cashback Is Cash Forward: Delaying a Discount to Encourage Future Spending (March 9, 2018). Available at SSRN: https://ssrn.com/abstract=2588611 or http://dx.doi.org/10.2139/ssrn.2588611

Prasad Vana (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States

Anja Lambrecht

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom

Marco Bertini

ESADE - Ramon Llull University ( email )

Avinguda de la Torre Blanca, 59
Sant Cugat del Vallès, 08172
Spain

Register to save articles to
your library

Register

Paper statistics

Downloads
324
rank
87,387
Abstract Views
1,305
PlumX Metrics