CBR Briefing #62

A bar chart plotting ticket purchase rates in response to promotions from nearby movie theaters versus distant ones. When the distant theater offered a forty percent discount and the nearby theater offered no discount, purchase rates were about the same at zero point two percent. But when the distant theater increased its discount to sixty percent, its purchase rate jumped to two-point-three-seven percent. When the nearby theater countered with a twenty percent discount, it gained with a one-point-five-eight percent rate to the distant theater’s zero-point-nine-four percent. And if the nearby theater upped its discount to forty percent versus the distant theater’s sixty percent, the nearby theater’s purchase rate jumped to four-point-four-four percent, versus zero-point-six.

How competition can moderate gains from text-message deals

  • Businesses sometimes use mobile devices to target consumers near their competitors by offering discounts and coupons, a tactic called geoconquesting. This can work, but competitors’ responses can dampen its effectiveness, according to a group of researchers including Chicago Booth’s Jean-Pierre Dubé.
  • The researchers conducted a field experiment involving two competing movie theaters in different shopping malls, located 4 kilometers (2.5 miles) apart. They monitored 18,000 smartphone subscribers within 500 meters of one of the malls, sending text-message offers for tickets at one or both theaters.
  • The distant theater had to offer subscribers near the other theater a steep 60 percent discount on ticket prices to see a sizable redemption rate. But when the nearby theater responded with a mere 20 percent discount, the distant theater’s redemption rate fell by more than half.

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