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Traditional and IS-Enabled Customer Acquisition on the Internet

Author

Listed:
  • Jeonghye Choi

    (Yonsei School of Business, Yonsei University, Seoul 120-749, Korea)

  • David R. Bell

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Leonard M. Lodish

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

Geographic variation in consumer use of Internet retailers is partly explained by variation in offline shopping costs. Explanations for geographic variation in the efficacy of different customer acquisition methods including traditional methods of offline word-of-mouth (WOM) and magazine advertising and information systems (IS)-enabled methods of online WOM and online search remain unexplored. We estimate a multivariate negative binomial distribution (NBD) model on zip code-level customer counts from a leading Internet retailer and provide new insights into factors explaining geographic variation in the success of these methods. First, we show that target customer density explains geographic variation over and above the impact due to the number of potential customers. Moreover, the effect of density is greatest for offline and online WOM acquisitions; this suggests that density contributes to contagion, connectivity, and a hypothesized "social multiplier." Second, when senders and recipients of WOM share consumption benefits, WOM is more powerful and compelling. We find that location-based convenience benefits have stronger effects on location-dependent offline WOM acquisitions than on location-independent online WOM acquisitions. Third, acquisition channels contribute differently to the total customer pool--offline WOM acquisitions are clustered, whereas magazine acquisitions are dispersed. Finally, separate click-to-conversion data from Coremetrics.com indicates that using the model-based predictions to target specific markets delivers a twofold improvement in actual click-to-order rates. This paper was accepted by Sandra Slaughter, information systems.

Suggested Citation

  • Jeonghye Choi & David R. Bell & Leonard M. Lodish, 2012. "Traditional and IS-Enabled Customer Acquisition on the Internet," Management Science, INFORMS, vol. 58(4), pages 754-769, April.
  • Handle: RePEc:inm:ormnsc:v:58:y:2012:i:4:p:754-769
    DOI: 10.1287/mnsc.1110.1447
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    2. Yoon, Jae Yeon & Lee, Chaehyeon & Choi, Jeonghye & Chang, Sue Ryung & Kim, Jikyung, 2022. "The effect of social media apps on shopping apps," Journal of Business Research, Elsevier, vol. 148(C), pages 23-32.
    3. Anindya Ghose & Beibei Li & Siyuan Liu, 2019. "Mobile Targeting Using Customer Trajectory Patterns," Management Science, INFORMS, vol. 65(11), pages 5027-5049, November.
    4. Tianshu Sun & Guodong (Gordon) Gao & Ginger Zhe Jin, 2019. "Mobile Messaging for Offline Group Formation in Prosocial Activities: A Large Field Experiment," Management Science, INFORMS, vol. 67(6), pages 2717-2736, June.
    5. Ana Babić Rosario & Kristine Valck & Francesca Sotgiu, 2020. "Conceptualizing the electronic word-of-mouth process: What we know and need to know about eWOM creation, exposure, and evaluation," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 422-448, May.
    6. Yingjie Zhang & Beibei Li & Ramayya Krishnan, 2020. "Learning Individual Behavior Using Sensor Data: The Case of Global Positioning System Traces and Taxi Drivers," Information Systems Research, INFORMS, vol. 31(4), pages 1301-1321, December.
    7. Kim, Mingyung & Kim, Jeeyeon & Choi, Jeonghye & Trivedi, Minakshi, 2017. "Mobile Shopping Through Applications: Understanding Application Possession and Mobile Purchase," Journal of Interactive Marketing, Elsevier, vol. 39(C), pages 55-68.
    8. Son, Jungmin & Kim, Jikyung (Jeanne) & Choi, Jeonghye & Kim, Mingyung, 2017. "Linking online niche sales to offline brand conditions," Journal of Business Research, Elsevier, vol. 70(C), pages 74-84.
    9. Jiang, Yan & Kim, Jeeyeon & Choi, Jeonghye & Kang, Moon Young, 2020. "From clicks to bricks: The impact of product launches in offline stores for digital retailers," Journal of Business Research, Elsevier, vol. 120(C), pages 302-311.
    10. Jae Young Lee & David R. Bell, 2013. "Neighborhood Social Capital and Social Learning for Experience Attributes of Products," Marketing Science, INFORMS, vol. 32(6), pages 960-976, November.
    11. Stefano Colombo & Noriaki Matsushima, 2020. "Competition Between Offline and Online Retailers with Heterogeneous Customers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 647-664, November.
    12. Park, Keeyeon & Kim, Hye-jin, 2020. "Understanding Mobile Application Usage Using Battery Status and Wi-Fi Network," ITS Conference, Online Event 2020 224871, International Telecommunications Society (ITS).
    13. Clarence Lee & Elie Ofek & Thomas J. Steenburgh, 2018. "Personal and Social Usage: The Origins of Active Customers and Ways to Keep Them Engaged," Management Science, INFORMS, vol. 64(6), pages 2473-2495, June.
    14. Grewal, Dhruv & Bart, Yakov & Spann, Martin & Zubcsek, Peter Pal, 2016. "Mobile Advertising: A Framework and Research Agenda," Journal of Interactive Marketing, Elsevier, vol. 34(C), pages 3-14.

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