Linking Clicks to Bricks: Spillover Benefits of Online Advertising
38 Pages Posted: 9 May 2018
Date Written: April 24, 2018
Businesses have widely used email ads to directly send promotional information to consumers. While email ads serve as a convenient channel that allows firms to target consumers online, are they effective in increasing offline revenues for firms that predominantly sell in brick-and-mortar stores? Is the effect of email ads, if any, heterogeneous across different consumer segments? If so, on which consumers is the effect highest? In this research, we address these questions using a unique high-dimensional observational dataset from one of the largest retailers in the US, which links each consumer’s online behaviors to the item-level purchase records in physical stores. We use a doubly robust estimator (DRE) that incorporates nonparametric machine learning methods and allows us to perform causal estimation on observational data. Using the DRE we find that receiving email ads can increase a consumer’s spending in physical stores by approximately $11.82. Additionally, we find that the increased offline sales result from increased purchase probability and a wider variety of products being purchased. Further, we use a data-driven approach to demonstrate that the effect of email ads is heterogeneous across different consumer segments. Interestingly, the effect is highest among consumers who have fewer interactions with the focal retailer recently (i.e., lower email opening frequency). Overall, our results suggest a reminder effect of email ads. Receiving email ads from the retailer can generate awareness and remind the consumer of the retailer’s offerings of various products and services, which gradually increase the consumer’s purchase probability in the retailer’s physical stores. These findings have direct implications for marketers to improve their digital marketing strategy design and for policy makers who are interested in evaluating the economic impact of prevalent email advertising.
Keywords: online advertising, offline sales, email ads, doubly robust estimator, machine learning, causal inference
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