Award-winning UNSW Business School research shows which customers benefit the most from retailer’s apps and suggests how to improve user engagement.
Mobile apps are fast becoming the go-to tactic for retailers because they offer the promise of highly convenient digital engagement, says , Professor of Marketing at UNSW Business School, who specialises in econometric models to improve marketing decision-making.
Dr van Heerde was recently awarded the best paper award by the International Journal of Research in Marketing – alongside his two co-authors economist Scott Neslin and quantitative researcher Isaac Dinner – for their paper .
In their paper, the authors hypothesise that companies can engage with two types of customers via a mobile retail app – “offline-only” customers currently purchasing exclusively from the retailer’s physical store, and “distant” customers. The latter reside far from the physical store.
“In the old days, customers would visit the store often, but given that everyone lives their lives through their mobile phone screens (regrettably), this is where retailers can engage with customers,” says Dr van Heerde. Indeed, their paper finds that apps can be a great tool to keep customers in the loop and keep them engaged.
Engaging the unengaged customer
The researchers examine the customers of a store that has both a physical store and an online store. They split the group of customers into those who exclusively shop in the physical store, or the ‘offline-only’ segment, and those who go online for at least part of their shopping experience (online customers).
They also distinguished between customers who live near the store or within the same metropolitan area, and distant customers outside of the metro area.
They find that having an app is especially useful in engaging customers who live outside of the city where the store is located but only shop in that physical store. Specifically, their usage of the app (which is a form of customer engagement) leads to a 9.5 per cent increase in spending, says Dr van Heerde.
“Our explanation is that for these customers, there is otherwise very little daily engagement (they live too far from the store to go there often and they don’t go online) and that the app offers a good way to engage them,” he explains.
So, the customers most likely to benefit from having an app would be “those who value convenience, are short on time and cannot check out the physical store,” concludes Dr van Heerde.
Implications for business
The researchers found that if the retailer could increase access or usage of the app by 50 per cent there would be a further 5 per cent increase in revenues for distant/offline-only customers. “Clearly the app provides a way to increase distant customer engagement and make it count” write the researchers.
“Basically, this is when a user taps on the app on their phone to open it. In the focal app, each day there was a new featured ‘product of the day’ (a fashion item), and this would draw app users to use it every day to see what the product of the day is,” continues Dr van Heerde.
He explains that other ways to draw users to your app might be through push notifications for promotions or news (although he says this can also become annoying), or by having some games or other activities that make users come back to the app.
Dr van Heerde says the most surprising finding of the paper is that even such a modest app – that focused on a “product of the day” – was able to generate such strong engagement.
The five features that engage users
Following on from the paper and based on his observations in this area, Dr van Heerde concludes that the following are features of a successful mobile retailer app.
- Value: First, the app must add value to the user. This can be done through discounts, relevant news, special events, rewards, social exchanges, games, or even IKEA’s use of AR, for example.
- Execution: The app must also have slick performance. This means it must be modern looking, with no bugs or glitches, and be easy to navigate.
- Depth: An app must have depth, not just one little feature but multiple menus (e.g., assortment, notifications, rewards, loyalty program).
- Personalisation: Being able to customise features is vital. This means offerings tailored to the specific customers based on their past purchase behaviour, preferences and profile.
- Problem-solving: Finally, the app must solve a unique problem for the user. For example, Uber addresses the question of the location of the rider and the driver, while Uber Eats solves the age-old problem of finding a meal. Banking apps solve the problem of having to do some banking on the go, while some supermarket apps solve the problem of having to carry reward cards. In China, many people use their social media, retailer apps and banking apps for all their transactions, and they don’t carry any cards or cash.
So any retailer app that can solve an important unmet customer need is likely to succeed. But what’s next? Dr van Heerde says he is also working on new research with gamified apps “where customers keep on coming back because they want to get to a higher level in the game”.
“I think this is a great idea that will take off. I would also love to see a supermarket app that shows you where you can find a product in the store,” he adds.
