ABSTRACT Recent research indicates that promotions targeted on new customers (acquisition promotions) and infrequent customers (activation promotions) can have negative spillover effects on untargeted customers. Despite frequent customers being excluded from these targeted promotions, no research has yet explored their relative reactions toward them. Given that frequent customers are highly sensitive to promotions and are crucial to companies, we conducted four online experiments to examine this issue. We find that being excluded from activation promotions (vs. acquisition promotions) leads to untargeted frequent customers' stronger tendency to compare themselves with targeted customers, resulting in lower retention intentions. This negative effect is mitigated when they discover this information online (vs. offline), or when the promotion's benefit timing is delayed (vs. immediate). Our findings offer a new direction for understanding the undesired spillover effect of targeted promotions and identify the relative impacts of different targeted promotions on frequent customers. We also provide valuable managerial insights on how to mitigate the negative spillover effects of targeted promotions by delivering delayed benefits to the right type of customers and through online channels.
Li et al. (Fri,) studied this question.
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