ROCHESTER, N.Y., April 23, 2015 (GLOBE NEWSWIRE) -- Consumers are hit with online ads every day based on their likes and dislikes, but how often does a retailer need to advertise online in order to have a positive effect on both online and in-store purchases? Advertisers assume that diminishing returns set in quickly once a consumer has seen enough ads, but according to new research from Simon Business School at the University of Rochester, the more a consumer sees an ad (repetition) and the closer a consumer lives to the location of a store (proximity), the larger the sales lift for the retailer.
This study titled, "Location, Location, Location: Repetition and Proximity Increase Advertising Effectiveness," demonstrates that online advertisements can translate into better in-store and online sales for brick-and-mortar retailers. It also found that for a retailer's most active customers and for those who live near the store's physical location; the effectiveness of online ads is especially high.
Garrett Johnson, assistant professor of marketing from Simon Business School, conducted this research while interning at Yahoo! Research, along with Randall Lewis and David Reiley from Yahoo!. The team ran a controlled experiment examining two consecutive weeklong ad campaigns on Yahoo!. The campaigns targeted three-million consumers of a nationwide retailer. Yahoo! Research and the retailer then partnered to explore how online display advertising affects both online and in-store purchases. This research was so successful that the results inspired a new product at Yahoo! called Proximity Match, which enables advertisers to target consumers who live near their stores.
"Our findings show just how much advertisers can learn, not only about the effectiveness of their ads, but how much this effectiveness varies between consumers segments," said Johnson. "This experiment unveils a host of new insights for advertisers to better target their ads to consumer preferences and is one of the most statistically powerful experiments examining ad effectiveness."
The researchers measured the impact of frequency of advertising exposure using a simple randomized experiment broken into three groups: full (saw retailer's ads), control (saw unrelated control ads), and half (saw equal mixture of retailer and control ads). Data was also collected on consumer location and past sales to examine variances in ad effectiveness.
Results show that retailer ads increased sales by approximately four percent proving the campaigns were profitable. Additionally, repeated exposure among users who see up to 50 advertisements in two weeks showed strong benefits. The study also reveals that retailer ads generate the largest sales lift among the retailer's best customers and those who live near a store.
This research tackles a classic problem in marketing, the effect of advertising on demand, and resolves it using a clean experiment. Previous research states that modern day retailers will struggle to detect the effects of their ad campaigns even in a clean experiment because the effects of even profitable campaigns are so small. However, this experiment relies on its large scale, careful design and higher intensity of ads to detect this profitable campaign. Researchers also demonstrate that proximity makes advertising more effective in differentiated markets. At the end of the day, the more times you view an ad and the closer you are to a particular retailer, the more likely you will visit their store, whether online or the brick-and-mortar location in your city.
To learn more about the cutting-edge research being conducted at Simon Business School, please visit www.simon.rochester.edu .
About Simon Business School
The Simon Business School is currently ranked among the leading graduate business schools in the world in rankings published by the popular press, including Bloomberg Businessweek, U.S. News & World Report, and the Financial Times . The Financial Times recently rated the School No. 3 in the world of economics and No. 5 in the world for finance. More information about Simon Business School is available at www.simon.rochester.edu
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