Reviving Order Online: Effects of the Social Media Mobile Apps as a Marketing Channel
Posted: 23 Aug 2016 Last revised: 16 Aug 2018
Date Written: August 13, 2018
Introduction of e-commerce function in social media mobile apps makes them a new marketing channel that enables consumers to pay merchants directly. The convenience of mobile payment and the richness of product information and promotions may trigger more demand. This study aims to quantify the effect of adopting social media mobile app as a new channel on business sales revenue on multiple channels. Using transaction data from a large hotel chain, we rely on variations in the timing of users following the company’s account in the mobile app to identify the effect of adopting the mobile channel on hotel room reservation. To mitigate endogeneity caused by the nonrandom selection of adopters and non-adopters, we apply the difference-in-differences approach with propensity score matched individuals. We also use a count data model and various instrumental variable (IV) estimations to strengthen the validity of our empirical analyses. Our results provide evidence that adopting the marketing channel in social media mobile apps will cause the consumers to make significantly more reservations from the hotel chain. More importantly, a significant proportion of the increase in reservation is attributed to more transactions from the existing channels, as consumers do no switch from existing channels to the new social media mobile channel. Interestingly, spillover especially occurs both on the offline channels with high operating costs, as well as online channels with convenient payment methods.
Keywords: social media mobile apps, marketing channels, hotel demand, spillover effect, cannibalization effect, econometric modeling
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