Evaluating the impact of VAT-free promotion:the role of loyalty program membership and category characteristics

This study examines the impact of value-added tax (VAT)-free promotions on sales performance. VAT-free promotions are a recently adopted form of price promotions where consumers are exempted from paying the VAT amount across almost all products in the assortment during a limited number of days. They are typically organized once per year and surrounded by a large amount of media attention from the involved retailer. To test the effects of this promotion on store and category sales, and investigate the differences between loyalty program (LP) members and non-LP members, the authors use scanner data from a Dutch durable goods retailer across a range of categories. The results show that VAT-free promotions positively impact store performance. Moreover, the findings indicate that more non-LP members are attracted to the store and that they increase the amount they spend in the store. While LP members also spend more in the store, this increase in shopping basket size does not compensate for the significant drop in the number of LP members that visit the store, leading to an overall decrease in sales coming from LP members during VAT-free days. We furthermore find that the positive effect of VAT-free promotions for non-LP members (rather than LP members) generalizes across all investigated categories. Our results provide key insights for retailers and direct marketers with regard to the effectiveness of VAT-free promotions in order to strategically segment the customer base

Empirical Investigations on the Effectiveness of Direct Marketing Communications

The goal of this dissertation is "to empirically study the effectiveness of retailer's direct marketing communications, by zooming in on customer, content and incentive characteristics". In Essay 1 (Calling Customers to Take Action: The Impact of Incentive and Customer Characteristics on Direct Mailing Effectiveness), I look into how customer and incentive characteristics affect the effectiveness of CTA direct mailings at the disaggregate level (consumer response) for a group optical retailers. In Essay 2 (Do store flyers trigger cross-category sales? The moderating role of categories' relatedness), I examine how the content of store flyers influences its effectiveness at the aggregate level (category sales), for a retailer active in a durable goods sector. More specifically, I look into the influence of the share of space allocated to each category on own and cross-category sales. In Essay 3 (Decomposition of VAT-free promotion effects: The role of loyalty program membership and category characteristics), I study the impact of a new type of incentive, communicated via print direct marketing, on retailer's sales performance, and how this effect varies across customers (LP members vs. non-LP members) and across categories, again at the aggregate level (store and category sales) and in the durable goods sector.status: publishe

Calling Customers to Take Action: The Impact of Incentive and Customer Characteristics on Direct Mailing Effectiveness

© 2018 This study investigates the effect of call-to-action (CTA) direct mailings (DMs) on customers’ purchase behavior and how this effect is moderated by incentive type as well as customer characteristics. The authors analyze individual purchase behavior of a panel of 179,525 customers across 40 Dutch optical retailers over 9 years. The empirical results show that CTA DMs that include an incentive have a higher positive impact on customer's purchase probability compared with those without an incentive. Furthermore, non-monetary incentives, especially utilitarian ones, have a higher positive impact than monetary incentives. Our results also show that customer heterogeneity plays an important role in the influence of CTA DMs on purchase incidence. More specifically, CTA DMs have a higher impact on purchase incidence for customers with higher past purchase frequency, lower purchase recency, longer relationship duration and for customers who received DM more recently and frequently. The results of the study provide valuable insights for managers allocating their direct marketing budget: it is better to use non-monetary (preferably utilitarian) incentives and to target customers based on relationship history as well as DM history.status: publishe

Calling Customers to Take Action:The Impact of Incentive and Customer Characteristics on Direct Mailing Effectiveness

This study investigates the effect of call-to-action (CTA) direct mailings (DMs) on customers' purchase behavior and how this effect is moderated by incentive type as well as customer characteristics. The authors analyze individual purchase behavior of a panel of 179,525 customers across 40 Dutch optical retailers over 9 years. The empirical results show that CTA DMs that include an incentive have a higher positive impact on customer's purchase probability compared with those without an incentive. Furthermore, non-monetary incentives, especially utilitarian ones, have a higher positive impact than monetary incentives. Our results also show that customer heterogeneity plays an important role in the influence of CTA DMs on purchase incidence. More specifically, CTA DMs have a higher impact on purchase incidence for customers with higher past purchase frequency, lower purchase recency, longer relationship duration and for customers who received DM more recently and frequently. The results of the study provide valuable insights for managers allocating their direct marketing budget: it is better to use non-monetary (preferably utilitarian) incentives and to target customers based on relationship history as well as DM history. (C) 2019 Direct Marketing Educational Foundation, Inc. dba Marketing EDGE. All rights reserved