E-commerce has an important limitation: it falls short in physically engaging customers – a task that physical stores are well-equipped to do. This capability is crucial because many products (we term them “deep products”) require physical engagement in order for the customer to make an intelligent, informed decision. When deep products can be purchased in-store, customers learn the value of in-store purchasing for these items and learn about the quality of the retailer’s offerings, thus resulting in higher customer future value. Successful physical engagement also motivates customers to “generalize” beyond the specific product they bought in the physical store.
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Zhang, Jonathan Z., Chun-wei Chang & Scott A. Neslin (2021), “How Physical Stores Enhance Customer Value: The Importance of Product Inspection Depth,” Journal of Marketing.
We investigate the role of the physical store in today’s multichannel environment. We posit that one benefit of the store to the retailer is to enhance customer value by providing the physical engagement needed to purchase deep products – products that require ample inspection in order for customers to make an informed decision. Using a multi-method approach involving a Hidden Markov Model (HMM) of transaction data and two experiments, we find that buying deep products in the physical store transitions customers to the high-value state more than other product/channel combinations. Findings confirm the hypotheses derived from experiential learning theory (ELT). A moderated serial mediation test supports the ELT-based mechanism for translating physical engagement into customer value: Customers purchase a deep product from the physical store. They reflect on this physical engagement experience, which, because it is tangible, concrete, and multi-sensory, enables them to develop strong learnings about the retailer. This experiential knowledge precipitates repatronage and generalizes to future online purchases online in the same category and in adjacent categories, thus contributing to higher customer value. This research suggests multichannel retailers use a combination of right-channel and right-product strategies for customer development and provides implications for experiential retail designs.
Special thanks to Holly Howe (Ph.D. candidate at Duke University) and Demi Oba (Ph.D. candidate at Duke University), for their support in working with authors on submissions to this program.
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