The Effects of Adopting and Using a Brand's Mobile Application on Customers' Subsequent Purchase Behavior

•We examine the effects of adopting and using a brand's mobile application on subsequent purchases.•We provide quantified evidence of the effects of mobile app using customers' mobile application log data and transaction histories that are more improved measures of these behaviors.•A brand's mobile app adoption has a positive effect on subsequent purchases.•The effect is elevated when customers use more interactive features available on the app.•Repeated use of the app increases future spending even more, while discontinuing the use of the app decreases it.

Mobile applications (apps) have become an important platform for brands to interact with customers, but few studies have tested their effects on app adopters’ subsequent brand purchase behavior. This paper investigates whether adopters’ spending levels will change after they use a brand’s app. Using a unique dataset from a coalition loyalty program with implementations of propensity score matching and difference-in-difference-in-difference methods, we compare the spending levels of app adopters with those of non-adopters. Specifically, we examine whether the use of the app’s two main interactive features—information lookups and check-ins—influences adopters’ spending levels. We find that app adoption and continued use of the branded app increase future spending. Furthermore, customers who adopt both features show the highest increase. However, we also observe “the recency effect” – when customers discontinue using the app, their spending levels decrease. Our findings suggest that sticky apps which attract continuing uses can be a persuasive marketing tool because they provide portable, convenient, and interactive engagement opportunities, allowing customers to interact with the brand on a habitual basis. We recommend that firms should prioritize launching a mobile app to communicate with their customers, but they should also keep in mind that a poorly designed app, which customers abandon after only a few uses, may in fact hurt their brand experience and company revenues.