Frontiers: Which Firms Gain from Digital Advertising? Evidence from a Field Experiment

Weijia Dai (), Hyunjin Kim () and Michael Luca ()
Additional contact information
Weijia Dai: Purdue University, West Lafayette, Indiana 47906
Hyunjin Kim: INSEAD, 77300 Fontainebleau, France
Michael Luca: Harvard Business School, Boston, Massachusetts 02163; National Bureau of Economic Research, Cambridge, Massachusetts 02138

Marketing Science, 2023, vol. 42, issue 3, 429-439

Abstract: Measuring the returns of advertising opportunities continues to be a challenge for many businesses. We design and run a field experiment on a large review platform across 18,294 firms in the restaurant industry to understand which types of businesses gain more from digital advertising. We randomly assign 7,209 restaurants to freely receive the platform’s standard ads package for three months. The scale of the experiment gives us a unique opportunity to assess the heterogeneity in advertising effectiveness across a variety of business attributes. We find that restaurants that receive advertising observe on average a 7%–19% increase in a wide range of purchase intention outcomes, as well as a 5% increase in customer reviews. We find that gains are heterogeneous across firms, with independent and higher-rated businesses observing larger gains, as well as those with more reviews and higher pre-experiment organic traffic.

Keywords: advertising; field experiments; restaurants; retail chains (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:42:y:2023:i:3:p:429-439

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