Engaging the unengaged customer: The value of a retailer mobile app

Mobile apps are becoming a go-to tactic for retailers because they offer the promise of highly convenient digital engagement. We hypothesize that two types of customers are best served by these apps — “offline-only” customers currently purchasing exclusively from the retailer's physical store, and “distant” customers who reside far from the physical store. For offline-only customers, the app complements the physical engagement they currently have. For distant customers, the app offers convenient engagement their remoteness currently precludes. We model app access and purchase behavior of 629 customers who downloaded a retailer's app. We find that apps generate more incremental sales among distant customers compared to near customers, and more incremental sales among offline-only customers compared to online customers. On an illustrative base of 100 K app users, we find accessing the app would generate $2.3 M in incremental sales. Consistent with our segmentation results, we find that the users with the greatest purchase lift (9.5%) due to app usage are those that are distant and offline-only. Our results confirm the economic value of retailer apps and their role as a segmentation strategy to enhance customer engagement.