Should retailers pay to bring customers back? The impact of quick response and coupons on purchase outcomes

Many retailers use coupons to compensate customers who complain. They also establish procedures to manage complaints quickly to avoid customer defection. Little attention has been paid to how these managerial actions used by retailers (e.g. coupons, quick response, etc.) interact and no research has linked these actions to consumers' actual behavior (e.g. the amount of money spent in the store before and after the incident). This paper investigates how quick responses and coupons jointly impact consumer behavior. This research tracked purchase patterns before and after an incident using loyalty card information from a grocery store. The paper shows that slow responses can reduce sales at this store by €950,000 a year. The results also show that when the response is slow, giving a coupon is counter-productive, since the loss is significantly higher when a coupon is issued.

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