Tuesday, March 22, 2016

Customer Response to Corporate Philanthropy: Field Experiments in an Online Marketplace

SINGH Jasjit,TENG Nina, NETESSINE Serguei 
Read the working paper
INSEAD Working Paper 2016/20/STR/TOM

Philanthropic campaigns are commonly used by companies to attract and retain customers. This practice often takes the form of charity-linked promotions, where a company donates money to a cause when a customer makes a purchase.
However, the effectiveness of such promotions remains under-studied. We investigate this issue using field experiments involving an online taxi booking platform. Customers were randomly assigned to receive either a charity-linked or discount-based promotion of comparable monetary value. Take-up rates for charity-linked promotions were smaller than for discount-based promotions, and less sensitive to the monetary amount – in line with a view that customer decisions are driven more by a “warm glow” of making a difference than the actual extent of their impact. Although use of the promotion codes represents additional bookings rather than substitution of bookings that the customers would have made anyway, we find little evidence of a subsequent increase in overall customer demand.