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Dynamics of Retail Advertising: Evidence from a Field ExperimentDuncan SimesterMassachusetts Institute of Technology (MIT) - Sloan School of Management Yu Jeffrey HuPurdue University - Krannert School of Management Erik BrynjolfssonMassachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER) Eric AndersonNorthwestern University - Department of Marketing October 2007 Economic Inquiry, Forthcoming Abstract: We present findings from a controlled field experiment that allows us to investigate the dynamic effects of retail advertising. The experimental design overcomes limitations that have hindered previous investigations of this issue. Our study uncovers dynamic advertising effects that have not been previously considered in the literature. We find that current advertising does affect future sales but surprisingly, the affect is not always positive; for the firm's best customers the long-run outcome may be negative. We argue that this finding reflects two competing effects: brand-switching and intertemporal substitution. The study also provides evidence of cross-channel substitution, with the firm's best customers switching demand to the ordering channel that corresponds to the advertising.
Number of Pages in PDF File: 39 Keywords: Advertising, Direct Mail, Field Experiment, Internet, Catalog, long-run demand JEL Classification: C93, M31, M37, L81, L15, O30, L2 working papers seriesDate posted: January 19, 2006 ; Last revised: February 19, 2008Suggested CitationContact Information
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