Three essays on the economics of emerging consumer channels

Abstract

Mobile device and artificial intelligence-driven technological development have progressively penetrated into every facet of our social and economic lives, quickly insinuating itself into the inner reaches of our psyche. These technologies have revolutionized and influenced how consumers interact with existing consumer channels, changing the search cost structures in the digital environment. Such rapid digitalization of business has challenged conventional business models by breaking down industry boundaries while engendering new opportunities. However, the technological changes could also diminish the information power of suppliers and such potential mitigation of information asymmetries may lender unintended consequences for firms and require them to alter their decision making processes. Although such alternative forms of interaction have begun to insinuate themselves into our lives, our understanding of the consequent economic value has not kept pace with these developments. Motivated by the dynamics of these radical transformations, we conducted three studies, with each delving into the effect of emerging consumer channels in various industry sectors—loyalty program, commercial banks, and video content platform. The first study explores the economic impact of digitalized loyalty programs in which on the surface, mobile-driven loyalty programs present significant upsides, lending to substantial competitive advantages to retailers. Yet, such strategic maneuvering can also put individual stores at high risk and induce more deal-susceptible behaviors of the inactive customers. The second study examines situations in finance industries in which digital banking adoption may lead to customer retention. In specific, we explore "hidden defection", in which customers purchase financial products from competing banks instead of their principal financial institutions, ultimately hurting banks' loyal customer base in the long term. Through the lens of the transaction cost economics perspectives, an analytic model is developed in complement to empirical analyses to further provide a comprehensive understanding of digital channel adoption. The third study investigates how customers' behavioral patterns change after smart speaker adoption and how interactions with such disruptive innovations influence their search, purchase, and consumption behaviors. Drawing from the interface modality and consumer behavior frameworks, digital content consumption and voice technology usage data were analyzed to provide insights to how voice can translate into revenues.