Variety Seeking in High-Frequency Consumption: New Implications for Targeted Marketing

We study consumers’ variety-seeking preferences and explore their implications for targeted marketing using proprietary data from a food delivery platform. We document that a substantial fraction of consumers have variety-seeking preferences. Consumers, on average, are willing to pay 19.9% more to switch to a different seller. In the counterfactual analysis, we find that optimizing ranking taking into account variety-seeking preferences increases revenue by 18.2%, consumer welfare by 14.2%, and purchase probability by 18.9%. Furthermore, we find that consumers’ variety-seeking preferences soften price competition. Optimal targeted pricing implies an increase in prices for rival sellers’ consumers and a decrease in prices for the seller’s own consumers.