52 Pages Posted: 17 Aug 2015 Last revised: 5 Jun 2017
Date Written: June 5, 2017
Offline retailers increasingly use location-based advertising (LBA) to target consumers in their vicinity with offers in real-time. The rationale for LBA is that geographic proximity increases the relevance for consumers and thus the effectiveness of such advertising campaigns. Two key interface-specific aspects of location-based advertising applications that influence its effectiveness are i) the provision of distance information and ii) the distance-based ranking of mobile coupons. The interface design is therefore often referred to as the choice architecture. The aim of this study is to test and quantify how the choice architecture – via the two interface-specific aspects – influence the effectiveness of location-based advertising for mobile coupons. We conduct a randomized field experiment with 633,729 observations including 3,644 different coupon promotions offered by 3,152 different stores & shops located in 2,589 cities in a large Western European country. Overall, we find negative distance and ranking effects. Our findings also demonstrate that the strength of distance effects depends on the actual geographic location of users. Regarding the setup of the application, we can show that the most effective advertising design is based on offers that are ranked by distance. However, users are more sensitive to increased distances if offers are not ranked by distance.
Keywords: Location-Based Services, Field Experiment, Mobile Analytics, Behavioral Effects, Interface Design, Choice Architecture
Suggested Citation: Suggested Citation
Molitor, Dominik and Reichhart, Philipp and Spann, Martin and Ghose, Anindya, Measuring the Effectiveness of Location-Based Advertising: A Randomized Field Experiment (June 5, 2017). Available at SSRN: https://ssrn.com/abstract=2645281 or http://dx.doi.org/10.2139/ssrn.2645281