TV Advertising and Online Sales: The Role of Inter-Temporal Substitution
47 Pages Posted: 6 Feb 2020 Last revised: 7 Jun 2021
Date Written: October 30, 2020
Digital technologies lead consumers to engage with companies online after they see TV ads. The measurability of such interactions is attractive to firms, but it is hard to know over what window of time to measure the effect of such interactions. On the one hand, firms might use a very narrow window to try and measure a causal effect. On the other hand, this shorter window might lead firms to miss the broader picture. To investigate this, we use data from a field test by an online travel agent. In the test, the company ran TV advertising in one region of the country while shutting off TV advertising for the remainder of the country. This allows the untreated region to serve as a control group when analyzing the effect of TV advertising on online browsing and sales in the treatment region. TV advertising leads to an instantaneous increase in online browsing and sales. However, we also document evidence for inter-temporal substitution: consumers appear to move forward in time their online activities in response to TV advertising, leading to lower browsing and lower sales at times when no ad is airing. We further document that TV advertising appears to shift consumers away from owned channels to paid channels and that TV advertising may attract consumers without the firm having to resort to price promotions.
Keywords: Television Advertising, Online Shopping, Field Test, Channel, Inter-temporal Substitution
JEL Classification: L82, L86, M37
Suggested Citation: Suggested Citation