Mobile Promos Encourage In-store Travel, Unplanned Spending

Mobile promotions, which persuade shoppers to travel farther within a store, can significantly increase unplanned spending, according to recent research published by the American Marketing Association (AMA).

The study was conducted by professor Sam Hui of the NYU Stern School of Business and co-authors Jeffrey Inman at the University of Pittsburgh's Katz Graduate School of Business; Yanliu Huang at Drexel University's LeBow College of Business; and Jacob Suher at the University of Texas at Austin.

"As smartphones proliferate and apps, such as FourSquare and Local Response, become ubiquitous, marketers are seizing this moment to enhance their location-based mobile marketing strategies," said Inman.

"Retailers have the ability to target their promotions in ways that weren't possible before," added Hui, "and our study provides a roadmap for mobile marketers who seek to increase unplanned spending in stores."

Retailers have long held the belief that encouraging customers to travel more of the store will lead to increased purchases. The study formally tested this theory. Professor Hui and his co-authors used radio frequency identification (RFID) tracking to collect in-store consumer path data and conducted a field experiment to examine the effect of in-store travel on unplanned spending.

They found:

• On average, shoppers travel approximately 1,400 feet in a grocery store.
• Traveling an additional 55 feet in the store generates around $1 in additional unplanned spending.
• Simulations based on the researchers' estimates suggest that strategically promoting three product categories via mobile promotion may increase unplanned spending by more than 16 percent.

The research team conducted a field experiment to assess the effectiveness of mobile promotions and found that a coupon that requires shoppers to travel farther from their planned path results in a substantial increase in unplanned spending ($21.29) versus a coupon for a product near their planned path ($13.83).

The paper, titled "The Effect of In-store Travel Distance on Unplanned Spending: Applications to Mobile Promotion Strategies," will appear in the March 2013 issue of the American Marketing Association's Journal of Marketing.