Tensile Promotions in Display Advertising
54 Pages Posted: 17 Oct 2016 Last revised: 10 Nov 2017
Date Written: November 7, 2017
Firms often advertise the maximum discount offered storewide, rather than a specific discount offered for a single product. However, it is unclear how such tensile discount claims of, for example, 'up to 70%' off, perform. On the one hand, promoting the maximum discount may help ads grab consumer attention. On the other hand, consumers may be looking for credible and specific signals in price promotions, not non-specific tensile claims. We use data from an online retailer that varied whether they advertised the maximum price discount they offered, or the actual discount on a specific item in their display advertising. We find that tensile price claims are on average, less effective than specific claims. A tensile price claim, relative to a specific claim, reduces a consumer's likelihood of clicking on an ad and conditional on clicking, reduces the consumer's likelihood of adding a product to the shopping cart. We present evidence that tensile price claims perform better than specific price claims only in instances when consumers are likely to have little price knowledge.
Keywords: Price Promotion, Online Advertising, Targeting, Tensile Promotions
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