Tensile promotions in display advertising

Subject

Marketing

Publishing details

Social Sciences Research Network

Authors / Editors

Lambrecht A; Tucker C E

Biographies

Publication Year

2017

Abstract

To attract the attention of potential customers, firms often advertise the maximum discount offered on any one good in the store, rather than the specific discount offered for the advertised product. However, it is unclear how such tensile claims of, for example, ‘up to 70%’ off, perform. On the one hand, promoting the maximum discount may help ads grab consumer attention in a cluttered advertising environment. On the other hand, consumers may be looking for credible and specific signals in price promotions, not non-specific tensile claims. We use data from an online retailer that experimented with a large number of display advertising campaigns which varied whether they advertised the maximum price discount they offered, or the actual discount on a specific item. Surprisingly, we find that tensile price claims that promote the maximum discount available are, on average, ineffective. A tensile price claim not only reduces a consumer’s likelihood of clicking on an ad but also, conditional on clicking, reduces their likelihood of adding a product to the shopping cart once they have arrived on the retailer’s website. We present evidence that tensile price claims perform better than specific price claims only in instances when consumers are likely to have little price knowledge. One explanation of these results is that tensile promotions are not considered as credible signals, especially by experienced consumers who have more price knowledge. We discuss implications for retailers as well as for policymakers concerned with consumer protection

Keywords

Price promotion; Online advertising; Targeting; Tensile Promotions

Series

Social Sciences Research Network