Competitive Mobile Targeting

Abstract

We investigate in a competitive setting the consequences of mobile targeting, the practice of firms setting prices based on consumers’ real-time locations. A distinct market feature of mobile targeting is that a consumer could travel across different locations for an offer that minimizes his total cost of buying. This cherry picking opportunity imposes constraints on firms to carefully balance prices across locations, which in turn weakens their price competition at each location. As a result, a firm’s profit can be higher under mobile targeting than under uniform pricing or under targeted pricing based on consumers’ permanent location. Extending the main model, we also discuss how the profitability of mobile targeting may change with the fraction of consumers who are mobile accessible to the firms, the distribution of consumers across locations, and the possibility of tracing down a consumer’s base location and restricting him to offers at that location. Our findings have important managerial implications for marketers who are interested in optimizing their mobile targeting strategies.