IDEAS home Printed from https://ideas.repec.org/a/eee/jouret/v99y2023i1p66-84.html
   My bibliography  Save this article

Evaluating strategies for promoting retail mobile channel using a hidden Markov model

Author

Listed:
  • Chen, Jialie
  • Rao, Vithala R.

Abstract

With the proliferation of mobile communication technology, many firms, including retailers and consumer banks, are making efforts to develop mobile platforms to better engage with their customers and reduce operational costs. However, the cost advantage of these mobile technologies will not yield fruition unless the mobile channel accounts for a significant share of total transactions. In this article, we explore potential options for firms to promote usage of the mobile channel. To achieve this, we propose a hidden Markov model to both model customers’ decisions and assess different managerial strategies through simulations. While we apply our proposed model to data from a leading financial institution, our approach is equally applicable to other retail settings. The results show that customers’ choices of services and channels are sensitive to process time by type of channel. A 10% increase in process time through non-mobile channels leads to a nearly 14% increase in utilization of mobile banking channel. Therefore, retailing firms could potentially influence customers’ choice of different channels by changing channel-specific process times. Motivated by these findings, we present and compare performances across five different policies, in promoting the usage of mobile channel. Drawing on our simulation results, we also make personalized policy recommendations to firms facing different levels of financial constraints. For those with financial constraints, we recommend a policy of increasing process time for a selected subset of service requests through non-mobile channels. Firms not constrained by the resources might be better off improving process time with the mobile channel by targeting customers identified as having a better relationship with the firm.

Suggested Citation

  • Chen, Jialie & Rao, Vithala R., 2023. "Evaluating strategies for promoting retail mobile channel using a hidden Markov model," Journal of Retailing, Elsevier, vol. 99(1), pages 66-84.
    • Handle: RePEc:eee:jouret:v:99:y:2023:i:1:p:66-84
    DOI: 10.1016/j.jretai.2022.07.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022435922000483
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jretai.2022.07.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Liran Einav & Jonathan Levin & Igor Popov & Neel Sundaresan, 2014. "Growth, Adoption, and Use of Mobile E-Commerce," American Economic Review, American Economic Association, vol. 104(5), pages 489-494, May.
    3. Jonathan Z. Zhang & Oded Netzer & Asim Ansari, 2014. "Dynamic Targeted Pricing in B2B Relationships," Marketing Science, INFORMS, vol. 33(3), pages 317-337, May.
    4. Oded Netzer & James M. Lattin & V. Srinivasan, 2008. "A Hidden Markov Model of Customer Relationship Dynamics," Marketing Science, INFORMS, vol. 27(2), pages 185-204, 03-04.
    5. Wang, Rebecca Jen-Hui & Malthouse, Edward C. & Krishnamurthi, Lakshman, 2015. "On the Go: How Mobile Shopping Affects Customer Purchase Behavior," Journal of Retailing, Elsevier, vol. 91(2), pages 217-234.
    6. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    7. Melis, Kristina & Campo, Katia & Lamey, Lien & Breugelmans, Els, 2016. "A Bigger Slice of the Multichannel Grocery Pie: When Does Consumers’ Online Channel Use Expand Retailers’ Share of Wallet?," Journal of Retailing, Elsevier, vol. 92(3), pages 268-286.
    8. Mei Xue & Lorin M. Hitt & Patrick T. Harker, 2007. "Customer Efficiency, Channel Usage, and Firm Performance in Retail Banking," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 535-558, April.
    9. Melis, Kristina & Campo, Katia & Breugelmans, Els & Lamey, Lien, 2015. "The Impact of the Multi-channel Retail Mix on Online Store Choice: Does Online Experience Matter?," Journal of Retailing, Elsevier, vol. 91(2), pages 272-288.
    10. Mark, Tanya & Lemon, Katherine N. & Vandenbosch, Mark & Bulla, Jan & Maruotti, Antonello, 2013. "Capturing the Evolution of Customer–Firm Relationships: How Customers Become More (or Less) Valuable Over Time," Journal of Retailing, Elsevier, vol. 89(3), pages 231-245.
    11. Unnati Narang & Venkatesh Shankar, 2019. "Mobile App Introduction and Online and Offline Purchases and Product Returns," Marketing Science, INFORMS, vol. 38(5), pages 756-772, September.
    12. Liu, Huan & Lobschat, Lara & Verhoef, Peter C. & Zhao, Hong, 2019. "App Adoption: The Effect on Purchasing of Customers Who Have Used a Mobile Website Previously," Journal of Interactive Marketing, Elsevier, vol. 47(C), pages 16-34.
    13. Krishnamurthi, Lakshman & Mazumdar, Tridib & Raj, S P, 1992. "Asymmetric Response to Price in Consumer Brand Choice and Purchase Quantity Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(3), pages 387-400, December.
    14. van Heerde, Harald J. & Dinner, Isaac M. & Neslin, Scott A., 2019. "Engaging the unengaged customer: The value of a retailer mobile app," International Journal of Research in Marketing, Elsevier, vol. 36(3), pages 420-438.
    15. Kim, Su Jung & Wang, Rebecca Jen-Hui & Malthouse, Edward C., 2015. "The Effects of Adopting and Using a Brand's Mobile Application on Customers' Subsequent Purchase Behavior," Journal of Interactive Marketing, Elsevier, vol. 31(C), pages 28-41.
    16. Daniel S. Putler, 1992. "Incorporating Reference Price Effects into a Theory of Consumer Choice," Marketing Science, INFORMS, vol. 11(3), pages 287-309.
    17. Lorin M. Hitt & Frances X. Frei, 2002. "Do Better Customers Utilize Electronic Distribution Channels? The Case of PC Banking," Management Science, INFORMS, vol. 48(6), pages 732-748, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Basu, Bibaswan & Sebastian, M.P. & Kar, Arpan Kumar, 2024. "What affects the promoting intention of mobile banking services? Insights from mining consumer reviews," Journal of Retailing and Consumer Services, Elsevier, vol. 77(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lim, Boram & Xie, Ying & Haruvy, Ernan, 2022. "The impact of mobile app adoption on physical and online channels," Journal of Retailing, Elsevier, vol. 98(3), pages 453-470.
    2. Timoumi, Ahmed & Gangwar, Manish & Mantrala, Murali K., 2022. "Cross-channel effects of omnichannel retail marketing strategies: A review of extant data-driven research," Journal of Retailing, Elsevier, vol. 98(1), pages 133-151.
    3. Liu, Huan & Sese, F. Javier, 2022. "The Impact of Mobile App Adoption on Cross-buying: The Moderating Roles of Product Category Characteristics and Adoption Timing," Journal of Retailing, Elsevier, vol. 98(2), pages 241-259.
    4. Bies, Suzanne M.T.A. & Bronnenberg, Bart J. & Gijsbrechts, Els, 2021. "How push messaging impacts consumer spending and reward redemption in store-loyalty programs," International Journal of Research in Marketing, Elsevier, vol. 38(4), pages 877-899.
    5. Bies, Suzanne, 2022. "Examining the effectiveness of activation techniques on consumer behavior in temporary loyalty programs," Other publications TiSEM ade86df3-4846-4318-938f-a, Tilburg University, School of Economics and Management.
    6. Sulin Ba & Shu He & Shun‐Yang Lee, 2022. "Mobile App Adoption and Its Differential Impact on Consumer Shopping Behavior," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 764-780, February.
    7. Jonathan Z. Zhang & Chun-Wei Chang, 2021. "Consumer dynamics: theories, methods, and emerging directions," Journal of the Academy of Marketing Science, Springer, vol. 49(1), pages 166-196, January.
    8. Lim, Xin-Jean & Cheah, Jun-Hwa & Ng, Siew Imm & Basha, Norazlyn Kamal & Soutar, Geoff, 2021. "The effects of anthropomorphism presence and the marketing mix have on retail app continuance use intention," Technological Forecasting and Social Change, Elsevier, vol. 168(C).
    9. Jonathan Z. Zhang & Oded Netzer & Asim Ansari, 2014. "Dynamic Targeted Pricing in B2B Relationships," Marketing Science, INFORMS, vol. 33(3), pages 317-337, May.
    10. Neslin, Scott A., 2022. "The omnichannel continuum: Integrating online and offline channels along the customer journey," Journal of Retailing, Elsevier, vol. 98(1), pages 111-132.
    11. Yuval Arbel & Danny Ben-Shahar & Stuart Gabriel, 2016. "Are The Disabled Less Loss Averse? Evidence From A Natural Policy Experiment," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1291-1318, April.
    12. Toshiaki Iizuka & Hitoshi Shigeoka, 2020. "Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare," NBER Working Papers 28057, National Bureau of Economic Research, Inc.
    13. van Heerde, Harald J. & Dinner, Isaac M. & Neslin, Scott A., 2019. "Engaging the unengaged customer: The value of a retailer mobile app," International Journal of Research in Marketing, Elsevier, vol. 36(3), pages 420-438.
    14. Robert Slonim & Ellen Garbarino, 2009. "Similarities and differences between stockpiling and reference effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 351-371.
    15. Ioana Popescu & Yaozhong Wu, 2007. "Dynamic Pricing Strategies with Reference Effects," Operations Research, INFORMS, vol. 55(3), pages 413-429, June.
    16. Sojin Jung & Hyeon Jeong Cho & Byoungho Ellie Jin, 2020. "Does effective cost transparency increase price fairness? An analysis of apparel brand strategies," Journal of Brand Management, Palgrave Macmillan, vol. 27(5), pages 495-507, September.
    17. El Ouardighi, Fouad & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard & Kort, Peter M., 2016. "Autonomous and advertising-dependent ‘word of mouth’ under costly dynamic pricing," European Journal of Operational Research, Elsevier, vol. 251(3), pages 860-872.
    18. Ho, Xuan Huong & Nguyen, Dong Phong & Cheng, Julian Ming Sung & Le, Angelina Nhat Hanh, 2022. "Customer engagement in the context of retail mobile apps: A contingency model integrating spatial presence experience and its drivers," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    19. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2017. "A theory of price adjustment under loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 78-95.
    20. Chang, Chun-Wei & Zhang, Jonathan Z., 2016. "The Effects of Channel Experiences and Direct Marketing on Customer Retention in Multichannel Settings," Journal of Interactive Marketing, Elsevier, vol. 36(C), pages 77-90.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jouret:v:99:y:2023:i:1:p:66-84. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-retailing .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.