Linking Clicks to Bricks: Spillover Benefits of Online Advertising

38 Pages Posted: 9 May 2018

See all articles by Mi Zhou

Mi Zhou

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Vibhanshu Abhishek

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Edward Kennedy

Carnegie Mellon University - Department of Statistics

Kannan Srinivasan

Carnegie Mellon University - David A. Tepper School of Business

Ritwik Sinha

Adobe Systems, Inc.

Date Written: April 24, 2018

Abstract

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

Suggested Citation

Zhou, Mi and Abhishek, Vibhanshu and Kennedy, Edward and Srinivasan, Kannan and Sinha, Ritwik, Linking Clicks to Bricks: Spillover Benefits of Online Advertising (April 24, 2018). Available at SSRN: https://ssrn.com/abstract=3168028 or http://dx.doi.org/10.2139/ssrn.3168028

Mi Zhou (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Vibhanshu Abhishek

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Edward Kennedy

Carnegie Mellon University - Department of Statistics ( email )

Baker Hall
Pittsburgh, PA 15213
United States

HOME PAGE: http://https://www.ehkennedy.com/

Kannan Srinivasan

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Ritwik Sinha

Adobe Systems, Inc. ( email )

345 Park Avenue
San Jose, CA 95110-2704
United States

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