A short decision-making guide on launching a mobile application

Lanlan CAO, Associate Professor of Marketing, Webin CAO Assistant Professor of Finance at NEOMA BS, with contributions by a researcher from the California Polytechnic University, have published an article in the rank 1* Journal of Retailing, on the effect of launching a mobile application on the value of a public listed company. The objective: to demonstrate whether the launch of such a channel increases a retailer's value in the financial markets.
Any entrepreneurs who have not been convinced so far, can now be reassured: the results of the study show that their investments in mobile applications are justified and financial markets will react positively to the announcement of the launch of a mobile application.

The findings of the study indicate that retailers need to adopt a mobile application launch strategy that suits the characteristics of their business. To do so, the following recommendation is given: to maximise a positive stock market response, explicitly indicate in communications how the decision to add a mobile application to the business strategy came about and how this addition corresponds specifically to the company.

3 key points your investors should know before the launch of a mobile app

  • Managers of small companies can indicate that launching a research application will help them expand their market reach at a low cost.
  • Product retailers can indicate that adding a mobile search application will allow their business to take advantage of multi-channel synergies by exploiting existing distribution channels.
  • Companies that target young customers and launch a mobile shopping application can indicate how they plan to counter any cannibalization effect by encouraging people to visit other digital and physical points of sale.

How did the three researchers manage to draw such conclusions that are directly applicable to decision-makers? The authors of the study first identified the type of mobile application to be launched. Applications generally fall into one of two categories:
- the so-called mobile "search" applications that provide access to information about the products offered by the company: catalogue product , price, colour, store opening hours, availability in stores, etc.
- and the so-called "purchase" mobile applications that allow commercial transactions to be carried out directly via the application.

The authors also considered the moderations that took place according to 3 key variables: the size of the company, the category of goods on sale (product or service) and the age of the target customer.
To complete their study, they analysed and compared the results of 115 announcements related to the launch of mobile applications by U.S. public listed retail companies between 2009 and 2016. And if the market reaction to these announcements is generally positive, certain configurations are likely to generate a leverage effect.

The determining impact of the nature of the application

Concerning announcements for the launch of mobile search applications, the market responds more positively to retail products than services. The following explanation is provided: companies that market products can benefit more from the effects of a multi-channel synergy between "online" and "offline" systems, as a result of stock exploitation. This is naturally impossible for retail services, which cannot be stocked.
The study further highlighted that mobile research applications were more beneficial to small rather than large companies. This is due in particular to the possibility for small businesses to reduce their communication costs. Indeed, marketing communications transmitted via an application can quickly reach a vast audience at a much lower cost than a traditional communication campaign.

Somewhat counterintuitive conclusions

Finally, and against all expectations, the launch of a mobile purchasing application leads to less positive financial market reactions for companies that specifically target young customers than for companies that do not specifically do so.
Indeed, while it is tempting to believe that the high degree of attachment young customers have for their mobile devices allows companies to benefit from a "locking" effect, financial markets do not perceive such affinity as an opportunity, quite the contrary. Investors fear a cannibalization effect on other sales outlets. As young consumers repeatedly and almost exclusively develop the use of the application to make their purchases, they also reduce their use of other channels, such as physical shops or the brand's website.

*RanK 1 FNEGE – Rank 2 CNRS

Article references: The Effects of Search-Related and Purchase-Related Mobile App Additions on Retailers’ Shareholder Wealth : The Roles of Firm Size, Product Category, and Customer Segment
- Lanlan Cao, Marketing Department, NEOMA Business School, Boulevard André Siegfried,76825 Mont-Saint-Aignan, France
- Xin Liu, California State Polytechnic University, Pomona,3801West Temple Blvd, Pomona, CA91768, USA
- Wenbin Cao, Finance Department, NEOMA Business School, Boulevard André Siegfried,76825 Mont-Saint-Aignan, France
Published in Journal of Retailing
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