Consumer Search and Purchase: An Empirical Investigation of Retargeting Based on Consumer Online Behaviors
49 Pages Posted: 12 Jan 2017 Last revised: 21 Feb 2019
Date Written: January 31, 2018
This paper empirically investigates how marketers can retarget consumers who have searched online but did not purchase, based on their search behaviors. To infer the relationship between search activities and preferences of retargeted consumers, we estimate a structural search model from data. Based on the estimation results, we then use a series of counterfactuals to explore how to improve the effectiveness of retargeting. Results show a substantial heterogeneity in responses to retargeting among consumers who exhibited different search behaviors. In contrast, the heterogeneity among consumers based on other characteristics (e.g. age, gender etc.) is moderate. We consider two counterfactual marketing strategies. The first is to send out coupons redeemed upon purchasing, and the second is to send seller recommendations that will reveal the actual offering of recommended sellers. We find that, while both strategies help increase the conversion rate, seller recommendations are more effective than coupons, suggesting the importance of providing consumers the seller information for retargeting. We also show that a pricing mechanism such as auctions making sellers self-select to participate will improve the effectiveness of retargeting. Finally, online retail platforms should provide participating sellers the information on consumers’ search behaviors. Such information will benefit not only the sellers but also consumers.
Keywords: consumer retargeting, consumer search, sequential search, online shopping
JEL Classification: C50, D03, M31
Suggested Citation: Suggested Citation