The Price of Customer Engagement: How Substitution in Online Services Leads to Decreasing Revenues

Abstract

Customer engagement in online communities seems to be key to building a successful online business. We show that while at an aggregated level customer activity and customer spending are indeed positively related, the contrary is the case at an individual level: Customer engagement in online communities substitutes spending. Substitution effects emerging from reveling can explain this empirical finding: Customers satisfy their needs for products or services by experiencing them online without purchasing them. These findings suggest that marketers should be cautious about actively increasing online customer engagement.