How special am I? Consumer responses to promotion individualization and notification exclusivity

Abstract

PurposeAlthough there are at least two important characteristics of targeted promotions—promotion individualization (i.e. whether the offer is personalized for the recipient) and notification exclusivity (i.e. how small the number of recipients is)—most previous studies on targeted promotion have conceptualized them synonymously. The purpose of this study is to investigate the effect of targeted promotion on consumer purchases by conceptualizing these separately and incorporating them in a single model. Also, this study explores how the effects of these differ depending on customer loyalty. We particularly examine the promotional responses of extremely loyal customers, distinguishing them from other loyal customers.Design/methodology/approachUsing actual customer purchase data, we develop a two-stage model of the consumer decision-making process involving decisions of whether and how much to purchase. The two characteristics of targeted promotions—promotion individualization and notification exclusivity—first influence the probability of purchase and then the purchase amount given purchase.FindingsThe results show that customers respond positively to individualization and exclusivity. The effect of individualization is reduced as customer loyalty increases from loyal customers to extremely loyal customers while that of exclusivity remains the same.Originality/valueBy clearly identifying the two characteristics of targeted promotions and developing an empirical model that captures the effects of these separately, this paper provides new academic and managerial insights that were not clearly identified in the current literature.