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Dynamics Of Retail Advertising: Evidence From A Field Experiment

Author

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  • DUNCAN SIMESTER
  • YU (JEFFREY) HU
  • ERIK BRYNJOLFSSON
  • ERIC T. ANDERSON

Abstract

We use a controlled field experiment to investigate the dynamic effects of retail advertising. The experimental design overcomes limitations hindering previous investigations of this issue. Our study uncovers dynamic advertising effects that have not been considered in previous literature. We find that current advertising does affect future sales, but surprisingly, the effect is not always positive; for the firm’s best customers, the long‐run outcome may be negative. This finding reflects two competing effects: brand switching and intertemporal substitution. We also find evidence of cross‐channel substitution, with the firm’s best customers switching demand to the ordering channel that corresponds to the advertising. (JEL L2, L81, M3)

Suggested Citation

  • Duncan Simester & Yu (Jeffrey) Hu & Erik Brynjolfsson & Eric T. Anderson, 2009. "Dynamics Of Retail Advertising: Evidence From A Field Experiment," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 482-499, July.
  • Handle: RePEc:bla:ecinqu:v:47:y:2009:i:3:p:482-499
    DOI: 10.1111/j.1465-7295.2008.00161.x
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    References listed on IDEAS

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    Cited by:

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    3. Navdeep S. Sahni, 2015. "Effect of temporal spacing between advertising exposures: Evidence from online field experiments," Quantitative Marketing and Economics (QME), Springer, vol. 13(3), pages 203-247, September.
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    6. Seth Stephens-Davidowitz & Hal Varian & Michael D. Smith, 2017. "Super returns to Super Bowl ads?," Quantitative Marketing and Economics (QME), Springer, vol. 15(1), pages 1-28, March.
    7. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 84-90.
    8. Lint Barrage & Eric Chyn & Justine Hastings, 2020. "Advertising and Environmental Stewardship: Evidence from the BP Oil Spill," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 33-61, February.
    9. Hailiang Chen & Prabuddha De & Yu Jeffrey Hu, 2015. "IT-Enabled Broadcasting in Social Media: An Empirical Study of Artists’ Activities and Music Sales," Information Systems Research, INFORMS, vol. 26(3), pages 513-531, September.
    10. Hong, Xianpei & Xu, Lei & Du, Peng & Wang, Wenjuan, 2015. "Joint advertising, pricing and collection decisions in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 167(C), pages 12-22.
    11. Navdeep Sahni, 2015. "Effect of temporal spacing between advertising exposures: Evidence from online field experiments," Quantitative Marketing and Economics (QME), Springer, vol. 13(3), pages 203-247, September.
    12. Lewis, Michael & Whitler, Kimberly A. & Hoegg, JoAndrea, 2013. "Customer Relationship Stage and the Use of Picture-Dominant versus Text-Dominant Advertising: A Field Study," Journal of Retailing, Elsevier, vol. 89(3), pages 263-280.
    13. Navdeep S. Sahni & Dan Zou & Pradeep K. Chintagunta, 2017. "Do Targeted Discount Offers Serve as Advertising? Evidence from 70 Field Experiments," Management Science, INFORMS, vol. 63(8), pages 2688-2705, August.
    14. Randall Lewis & David Reiley, 2014. "Online ads and offline sales: measuring the effect of retail advertising via a controlled experiment on Yahoo!," Quantitative Marketing and Economics (QME), Springer, vol. 12(3), pages 235-266, September.
    15. Hailiang Chen & Yu Jeffrey Hu & Michael D. Smith, 2019. "The Impact of E-book Distribution on Print Sales: Analysis of a Natural Experiment," Management Science, INFORMS, vol. 65(1), pages 19-31, January.
    16. Wilfred Amaldoss & Woochoel Shin, 2011. "Competing for Low-End Markets," Marketing Science, INFORMS, vol. 30(5), pages 776-788, September.
    17. Ruichang Lu & Qiaowei Shen & Tenghui Wang & Xiaojun Zhang, 2022. "Frenemies: Corporate Advertising Under Common Ownership," Management Science, INFORMS, vol. 68(6), pages 4645-4669, June.
    18. Gázquez-Abad, Juan Carlos & Canniére, Marie Hélène De & Martínez-López, Francisco J., 2011. "Dynamics of Customer Response to Promotional and Relational Direct Mailings from an Apparel Retailer: The Moderating Role of Relationship Strength," Journal of Retailing, Elsevier, vol. 87(2), pages 166-181.
    19. Tong Wang & Cheng He & Fujie Jin & Yu Jeffrey Hu, 2022. "Evaluating the Effectiveness of Marketing Campaigns for Malls Using a Novel Interpretable Machine Learning Model," Information Systems Research, INFORMS, vol. 33(2), pages 659-677, June.
    20. Tuli, Kapil R. & Mukherjee, Anirban & Dekimpe, Marnik G., 2012. "On the Value Relevance of Retailer Advertising Spending and Same-store Sales Growth," Journal of Retailing, Elsevier, vol. 88(4), pages 447-461.

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    More about this item

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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