Balancing Customer Engagement and Annoyance in Online Retail: Insights from a Field Experiment

Abstract

The emergence of e-commerce and digital operations has given firms unprecedented reach: retailers can now send real-time emails and mobile notifications to customers anywhere in the world. These direct-to-consumer promotions (e.g., coupons, emails, push alerts) can boost engagement and sales, but when overused, they can create annoyance and notification fatigue, alienate customers, increase unsubscriptions, and ultimately weaken long-term customer spending. In this paper, we first conduct a large-scale randomized field experiment at an online retailer to study this trade-off between engagement and annoyance. We find that sending fewer emails significantly reduces unsubscription (proxy for churn) by 59% and thus increases future customer survival, but at the cost of a 5-8% decrease in short-term revenue and purchase rate. These effects are heterogeneous: reducing coupon-email frequency lowers churn, especially among customers who previously used few coupons but opened many emails, and it reduces short-run spending, particularly among higher-volume customers and those who rarely opened emails. Then, using historical data over a longer time frame, we find that unsubscribing has a large negative effect on monthly revenue, with a 36% decrease in customer spending. We then embed these results in a customer lifetime-value (CLV) optimization model. The model shows that personalizing email frequency using the field-experimental estimates can improve long-term value: a myopic policy (maximizing immediate revenue) raises average CLV by 6.8%, while a full CLV-optimization policy yields an 8.3% gain over the daily-email baseline. These gains are driven by higher retention as well as modest changes in coupon usage. Overall, our findings highlight the importance of balancing short-term revenue with customer retention: sending emails with coupons too frequently can boost immediate sales but may "burn out" customers, whereas moderately reducing email frequency can yield higher lifetime value in many settings.