An Empirical Investigation of Personalized Recommendation and Reward Effect on Customer Behavior: A Stimulus–Organism–Response (SOR) Model Perspective

Abstract

With the continuous growth in the Home Meal Replacement (HMR) market, the significance of recommender systems has been raised for effectively recommending customized HMR products to each customer. The extant literature has mainly focused on enhancing the performance of recommender systems based on offline evaluations of customers’ past purchase records. However, since the existing offline evaluation methods evaluate the consistency of products on the recommendation list with ones purchased by customers from the test dataset, they are incapable of encompassing components such as serendipity and novelty that are also crucial in recommendation. Moreover, the existing offline evaluation methods cannot measure rewards such as discount coupons that may play a vital role in strengthening customers’ desire for purchase and thereby stimulating their purchase with a provision of a recommendation list. In this study, we used an SOR model to verify the effect of personalized recommendation stimulus on a customer’s response in an actual online environment. The results indicate that the customers’ response rate was higher with a provision of personalized recommendations than that of bestseller recommendations, and higher when being offered with cash discounts than earning redeemable points. Meanwhile, the response rate to the recommendation with higher volumes of rewards was not as high as expected, while the point pressure mechanism did not work either.