Getting targeted promotions right

The prevalence and widespread usage of e-mail has given businesses a direct and cost effective way of providing consumers with targeted promotional offers. In fact, e-mailed promotions can serve as a form of "advertising" for a firm's products. According to a study conducted by professor Pradeep Chintagunta, Chicago Booth School of Business, titled 'Effects of targeted promotions', targeted promotion can lead to 37.2 per cent increase in consumer purchases during the promotion window. However, 90 per cent of these gains are not through redemption of the offers.

The study, which was conducted using individual-level data from 70 randomised experiments, run by a large online ticket resale platform, measured the impact of e-mailed promotions by comparing purchases of individuals who received the promotions with those who did not receive the offers. Interestingly, the study found that the effects of the promotion continued even after it had expired. Additionally, increase in spending is also due to cross category spillovers to non-promoted products.