Professor of Strategy
Corporate Philanthropy; Corporate Social Responsibility; Field Experiments; Customer Behavior; Online Marketplaces;
Journal Article | Management Science | | December 2018
Philanthropic Campaigns and Customer Behavior: Field Experiments on an Online Taxi Booking Platform
Firms commonly undertake philanthropic campaigns as a means of attracting and retaining customers. Such campaigns often take the form of charity-linked promotions, whereby a firm donates a specific amount to a charitable cause when a customer takes up the promotion through a related purchase.The authors carried out three field experiments to study such promotions in the context of an online taxi booking platform. Customers were randomly assigned to different treatment groups, which received either a charity-linked or a discount-based promotion from a range of monetary amounts. Take-up rates for charity-linked promotions were not only much smaller than for discount-based promotions but also less sensitive to the exact amount involved, consistent with a view that the decision to take up a charity-linked promotion was driven in part by a “warm glow” from mere association with giving.They also find a selection effect in promotion take-up: charity-linked promotions were disproportionately taken up by people who had already been more active customers. Although a promotion take-up does seem to represent new demand rather than mere substitution of a booking that would have occurred anyway, longitudinal data analysis reveals little evidence of a lasting treatment effect on long-term demand beyond the promotion period for either kind of promotion.Given the high cost relative to benefit for the promotional bookings themselves, this finding raises concerns regarding the prevalent practice of firms devoting significant funds for short-term promotions without rigorously examining their exact impact.