The interaction of discount promotion and display-related promotion on on-demand platforms

Abstract

O2O (Online to Offline) on-demand service platforms have grown significantly. With the intensive competition on platforms, effective promotion strategies are the key to the success of O2O stores. Given the specific features of O2O platforms and mobile apps, how different promotions strategies work remain a question. The study investigates the effectiveness of different promotion strategies and their interactions on O2O platforms. Using daily sales data from a store on a well-known O2O platform, we construct a product-level panel with daily sales and promotion information. With fixed-effect regressions and GMM models, we find that both discount promotions including price discounts and order-level discounts and display-related promotions including display banners and rankings in lists can significantly increase product sales. We find that top rankings may be one of the most effective promotion strategies in O2O context. Seemingly organic rankings in lists is more effective than large store-page banners. We also find that direct price discounts perform better than order-level discounts for reaching a threshold. Price discounts and display-related strategies strongly complement each other to increase sales, while the impact of order-level discounts cannot be strengthened with display-related promotions. The findings reveal interesting patterns of how different promotion strategies affect sales and interact with each other and provide theoretical and practical implications.