16:30 TV Advertising and Online Sales: The Role of Inter-Temporal Substitution
Anja Lambrecht, London Business School
Digital technologies lead consumers to instantaneously engage with companies online following TV advertising. As a result, companies increasingly aim to coordinate TV advertising with consumer online behavior. This has led companies and researchers to examine the effect of TV ads on online browsing and sales. As firms tend to show ads when consumers are most likely to respond, prior research has typically focused on a tight time window around TV ad exposure in order to identify a casual effect on online behavior. The downside of such an approach, however, is that it abstracts away from potential shifts in browsing or sales over time. In this paper, 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 online browsing and sales in the treated region. We find that TV advertising indeed leads to an instantaneous increase in online browsing and sales. However, we document that this instantaneous increase in online browsing sessions and sales comes at the cost of inter-temporal substitution leading to lower browsing and lower sales at times when no ad is aired. We document though a positive side to TV advertising which mitigates somewhat the negative effects of inter-temporal substitution. TV advertising does appear to manage to attract consumers without having to resort to price promotions – potentially leading to higher prices being paid on average by consumers.