Creating Customer Engagement Via Mobile Apps: How App Usage Drives Purchase Behavior

Abstract

The proliferation of smartphones has spawned a new industry – mobile apps. Managers increasingly recognize the potential for mobile commerce apps to “engage” customers and thereby grow sales. To measure this potential, this paper examines what drives customer usage of apps and whether app usage drives purchases in the online and offline channels. The paper proposes three key drivers of app usage – marketing efforts, app-related consumer factors and app design. The drivers are empirically tested on a unique database provided by an upscale retailer on 1286 customers who have downloaded the retailer’s mobile app. The data record app usage and online and offline purchase behavior. The authors estimate models for using or “accessing” the app and the translation of access into both online and offline purchase. The results demonstrate that app access is driven by online advertising, social media messaging, app upgrades, state dependence and purchase history. Importantly, accessing the mobile app translates into both online and offline purchases, although as expected, more so online than offline. The paper concludes with managerial implications.

Keywords: mobile apps, app usage, online advertising, dynamic models

JEL Classification: M31, M37