Read the working paper
INSEAD Working Paper 2016/25/STR/TOM revised version of 2016/20/STR/TOM
Companies commonly use philanthropic campaigns to attract and retain customers. Such campaigns often take the form of charity-linked promotions, where a company donates money to a cause when a customer makes a purchase. However, customer-related effects of such promotions remain under-studied, an issue this study investigates using field experiments in an online taxi booking company.
Customers were randomly assigned to receive either a charity-linked or discount-based promotion. Take-up rates for charity-linked promotions were smaller than for discount-based promotions, and also less sensitive to the monetary amount. This is consistent with customer decisions being driven by a “warm glow” of giving and not just their extent of social impact. Although promotion take-up did represent new bookings rather than substitution of non-promotional bookings, there is little evidence of an increase in subsequent purchase frequency. This result raises questions regarding the common practice of online platforms devoting significant investor funds for short-term promotions.