Targeted reminder advertising: Retailers’ new weapon against cart abandonment

Abstract

Cart abandonment is a major problem online retailers currently face. Website visitors leave without purchase mostly because they are not ready to buy and want to continue online search. Firms follow up with these consumers by sending reminder ads to keep their products that consumers abandoned in their carts on top of their minds till their online search ends. Consumers vary in their degree of preference match with firms’ products; the higher preference mismatch, the longer a consumer searches online seeking a better matching alternative. Firms can infer consumers’ preferences based on their digital footprints during their online search and customize their reminder advertising campaign. The default strategy is to pursue all website visitors with a uniform reminder advertising campaign. Our analytical model allows firms to upgrade to segmented or personalized advertising technologies; we investigate firms’ optimal advertising and pricing decisions. Our results offer both strategic and tactical guidelines.