The Impact of Mobile App Failures on Online and Offline Purchases

Posted: 20 Mar 2018 Last revised: 6 Jan 2019

See all articles by Unnati Narang

Unnati Narang

Texas A&M University - Mays Business School

Venkatesh Shankar

Texas A&M University - Mays Business School

Sridhar Narayanan

Stanford Graduate School of Business

Date Written: March 20, 2018

Abstract

Over half of all shopping journeys start with the mobile channel. In particular, the presence of a branded mobile app significantly influences shopping across channels. However, a majority of app users decrease app usage or even abandon an app, in part, due to app service failure(s). Do app failures influence purchases made within the online channel? Are there any spillover effects across other channels? What factors moderate the within and across channel effects? We leverage exogenous systemwide failure shocks in a large multichannel retailer’s mobile app and related data to examine the impact of app failures on purchases in all channels using a differences-in-differences approach. We investigate heterogeneity among shoppers using a set of moderators of these effects based on insights from prior research. Our analysis reveals that although app failures have a significant overall negative effect on shoppers’ frequency, quantity, and monetary value of purchases across channels, the effects are heterogeneous across channels and shoppers. Interestingly, the overall decreases in purchases across channels are driven by purchase reductions in brick and mortar stores and not in digital channels. Furthermore, we find that shoppers with a stronger relationship with the retailer, greater digital channel use, and who experienced failures less attributable to the retailer, are less sensitive to app failures. We outline failure preventive and recovery strategies for app providers based on the insights from this study.

Keywords: service failure, mobile marketing, mobile app, retailing, omnichannel, difference-in- differences, natural experiment

JEL Classification: M31, L81, C01, C23, C90

Suggested Citation

Narang, Unnati and Shankar, Venkatesh and Narayanan, Sridhar, The Impact of Mobile App Failures on Online and Offline Purchases (March 20, 2018). Mays Business School Research Paper No. 3144434; Stanford University Graduate School of Business Research Paper No. 18-18. Available at SSRN: https://ssrn.com/abstract=3144434 or http://dx.doi.org/10.2139/ssrn.3144434

Unnati Narang (Contact Author)

Texas A&M University - Mays Business School ( email )

Wehner 401Q, MS 4353
College Station, TX
United States

Venkatesh Shankar

Texas A&M University - Mays Business School ( email )

Wehner 401Q, MS 4353
College Station, TX 77843-4218
United States
979-845-3246 (Phone)

HOME PAGE: http://www.venkyshankar.com

Sridhar Narayanan

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9675 (Phone)

HOME PAGE: http://https://gsbapps.stanford.edu/facultybios/bio.asp?ID=409

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