Linking Clicks to Bricks: Spillover Benefits of Online Advertising

Abstract

Businesses have widely used email ads to directly send promotional information to consumers. While email ads serve as a convenient channel that allows firms to target consumers online, are they effective in increasing offline revenues for firms that predominantly sell in brick-and-mortar stores? Is the effect of email ads, if any, heterogeneous across different consumer segments? If so, on which consumers is the effect highest? In our paper, we address these questions using a unique high-dimensional dataset from one of the largest retailers in the United States, which links each consumer’s online behaviors to the item-level purchase records in physical stores. We use a doubly robust estimator (DRE) that incorporates nonparametric machine learning methods and allows us to perform causal estimation on observational data. Using the DRE we find that on average receiving email ads can increase a consumer’s spending in physical stores by approximately $0.47. Additionally, we find that the increased offline sales result from increased purchase probability and a wider variety of products being purchased by the consumer. Further, we use a data-driven approach to demonstrate that the effect of email ads is heterogeneous across different consumer segments. Overall, our results provide empirical evidence for the positive effect of email ads on consumers’ offline purchase. Receiving email ads from the retailer can generate awareness and remind the consumer of the retailer’s offerings of various products and services, which could increase the consumer’s spending in the retailer’s physical stores. These findings have direct implications for managers to improve their digital marketing strategy design and for policy makers who are interested in evaluating the economic impact of prevalent email advertising.