The Dark Side of Mobile App Adoption: Examining the Impact on Customers’ Multichannel Purchase

Abstract

Firms use mobile applications to engage with customers, provide services, and encourage customer purchase. Conventional wisdom and previous research indicate that apps have a positive effect on customer spending. The authors critically examine this premise in a highly competitive institutional context by estimating how customers’ multichannel spending changes after adopting a hotel group’s app and identifying the factors contributing to such change. Exploiting the variation in customers’ timing of app adoption and using a difference-in-differences approach, the authors find that the effect of app adoption on customers’ overall spending is significant and negative. Additional analyses suggest the possibility that customers who adopt the focal app also adopt competitor apps and therefore search more and shop around, leading to decreased share of wallet with the focal hotel group. The authors also find that the negative effect on spending is smaller for customers who use the app for mobile check-in service than those who use the app for only searching, highlighting the role of app engagement in mitigating the negative effect.