Discussion Paper No. 501
April 9, 2024
The Effect of an Ad Ban on Retailer Sales: Insights from a Natural Experiment
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Advertising bans typically target products that deceive consumers in ways that can threaten their physical and mental health. An alternative policy objective might seek environmental protection through a ban on print advertising. Such measures would profoundly affect grocery retailers relying on printed leaflets to communicate weekly promotions. We measure the causal effect of banning advertising on retail performance by studying a temporary advertising ban implemented in a German federal state during the COVID-19 pandemic. The ban resulted in the suspension of all print advertising by grocery retailers, and the exogenous variation in advertising created by this natural experiment serves as our identification strategy. We apply difference-in-differences regressions to data from a national grocery retailer and find that the ban resulted in a 6% sales decrease in the treated state compared with an adjacent state. GfK Household Panel data reveals no effect of the advertising ban on the market level but a negative impact on retailers offering and advertising weekly promotional product assortments. We study the sensitivity of these results to the COVID pandemic and find that neither changes in COVID-19 incidence, vaccination rates, nor customers’ mobility moderate the ad ban effect. The findings offer practical insights for regulators and retailers regarding the impact of ad bans and the value of advertising.
Keywords:
advertising effectiveness; advertising ban; sustainability; natural experiment; retailing;
JEL-Classification:
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Discussion Paper No. 493
February 13, 2024
Does Online Fundraising Increase Charitable Giving? A Nationwide Field Experiment on Facebook
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Does online fundraising increase charitable giving? Using the Facebook advertising tool, we implemented a natural field experiment across Germany, randomly assigning almost 8,000 postal codes to Save the Children fundraising videos or to a pure control. We studied changes in the donation revenue and frequency for Save the Children and other charities by postal code. Our geo-randomized design circumvented many difficulties inherent in studies based on click-through data, especially substitution and measurement issues. We found that (i) video fundraising increased donation revenue and frequency to Save the Children during the campaign and in the subsequent five weeks; (ii) the campaign was profitable for the fundraiser; and (iii) the effects were similar independent of video content and impression assignment strategy. However, we also found some crowding out of donations to other similar charities or projects. Finally, we demonstrated that click data may be an inappropriate proxy for donations and recommend that managers use careful experimental designs that can plausibly evaluate the effects of advertising on relevant outcomes.
Keywords:
charitable giving; field experiments; fundraising; social media; competition;
JEL-Classification:
C93; D64; D12;
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Discussion Paper No. 482
December 15, 2023
When Zeros Count: Confounding in Preference Heterogeneity and Attribute Non-attendance
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Identifying consumer heterogeneity is a central topic in marketing. While the main focus has been on developing models and estimation procedures that allow uncovering consumer heterogeneity in preferences, a new stream of literature has focused on models that account for consumers’ heterogeneous attribute information usage. These models acknowledge that consumers may ignore subsets of attributes when making decisions, also commonly termed “attribute nonattendance" (ANA). In this paper, we explore the performance of choice models that explicitly account for ANA across ten different applications, which vary in terms of the choice context, the associated financial risk, and the complexity of the purchase decision. We systematically compare five different models that either neglect ANA and preference heterogeneity, account only for one at a time, or account for both across these applications. First, we showcase that ANA occurs across all ten applications. It prevails even in simple settings and high-stakes decisions. Second, we contribute by examining the direction and the magnitude of biases in parameters. We find that the location of zero with regard to the preference distribution affects the expected direction of biases in preference heterogeneity (i.e., variance) parameters. Neglecting ANA when the preference distribution is away from zero, often related to whether the attribute enables vertical differentiation of products, may lead to an overestimation of preference heterogeneity. In contrast, neglecting ANA when the preference distribution spreads on both sides of zero, often related to attributes enabling horizontal differentiation, may lead to an underestimation of preference heterogeneity. Lastly, we present how the empirical results translate into managerial implications and provide guidance to practitioners on when these models are beneficial.
Keywords:
choice modeling; preference heterogeneity; attribute non-attendance; inattention;
JEL-Classification:
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Discussion Paper No. 404
June 30, 2023
I'll Try That, Too - A Field Experiment in Retailing on the Effect of Variety During Display Promotions
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The effect of variety on consumer choice has been studied extensively, with some stream of literature showing the positive effects on choice and others arguing that too many alternatives may result in negative consequences (i.e., choice deferral or no purchase at all), often referred to as choice overload. In a field experiment with a major chocolate brand conducted at a German retail chain, we test for variety during a price and display promotion. Participating stores either include the full variety of products on the display or a reduced selection (low variety). Contrary to the literature on choice overload, we find a significantly positive effect of the display promotion on unit sales, which is stronger for stores with high variety. Further findings show a stronger promotion uplift for less popular products in stores with high variety on the display. This suggests that more variety may increase consumers’ willingness to try new products, when the financial risk is low. We also test for the effect of product distribution on displays by analysing the number of facings. Additionally, we introduce an approach to determine an optimal space allocation of products on the display. Our findings suggest that an even distribution results in the highest profits for the retailer. We contribute to the literature on variety for consumer choices by offering insights from actual purchases with store-level scanner data of display promotions.
Keywords:
variety; retailing; in-store display; field experiment;
JEL-Classification:
M31 Marketing; C23; C93; D12;
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Discussion Paper No. 371
January 20, 2023
Home alone: Widows' Well-Being and Time
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Using data from the Survey of Health, Ageing and Retirement in Europe (SHARE, 2004-17) and time diaries from Poland (2013), the U.S. (2006-16), the U.K. (2014-15) and France (2009-10), we examine differences between widowed and partnered older women in well-being and its development in widowhood. Most importantly, our analysis accounts for time use, an aspect which has not been studied previously. We trace the evolution of well-being of women who become widowed by comparing them with their matched non-widowed ‘statistical twins’ and examine the role of an exceptionally broad set of potential moderators of widowhood’s impact on well-being. We confirm a dramatic decrease in mental health and life satisfaction after the loss of partner, followed by a slow partial recovery over a five-year period. An extensive set of controls recorded prior to widowhood, including detailed family ties and social networks, provides little help in explaining the deterioration in well-being. Unique data from time-diaries kept by older women in several European countries and the U.S. tell us why: the key factor behind widows’ reduced well-being is increased time spent alone.
Keywords:
widowhood; well-being; social networks; time use;
JEL-Classification:
I31; I19; J14;
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Discussion Paper No. 346
November 30, 2022
When Transaction-Level Wage Transparency Can Increase Consumer Preference
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Firms are usually reluctant to disclose information about the production costs of their goods and services; however, some firms have recently started to disclose cost information to consumers. This research examines the consequences of disclosing transaction-level wage information on consumer preferences. Six experiments, both in field and lab settings across multiple service domains, document that disclosing a service worker’s compensation can increase consumer preference for that firm’s service if the compensation is sufficiently high (i.e., perceived as fair by consumers). This greater preference for services provided in a fair-wage setting is driven by consumers’ feelings of anticipated guilt and higher expectations concerning quality. Available social norms regarding fair compensation and the nature of the service worker (human vs. non- human) are both identified as important boundary conditions of the proposed process. This research offers a first step toward understanding the psychological and behavioral consequences of disclosing transaction-level wage information to consumers, thereby enabling managers to better identify when they should disclose wage information as part of their marketing strategy. This research also informs policy makers on how to encourage social preferences and consumer choices in order to promote fair outcomes for consumers, firms, and workers.
Keywords:
transaction-level wage transparency; social preferences; fairness; pricing; wage inequality;
JEL-Classification:
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Discussion Paper No. 343
The Impact of Uncertainty on Customer Satisfaction
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Customer satisfaction is an important metric to predict customer behavior and as a result firms' profitability. Expectations of a product's performance serve as a reference point against which customers evaluate their satisfaction with the products' actual performance. However, what is the effect of uncertainty in expectations? This paper develops a novel theoretical model of satisfaction, in which expectations reflect distributions of individual beliefs about performance outcomes. Based on this model, uncertainty shifts subjective reference points upward. That is, uncertainty increases the performance level at which customers switch from being dissatisfied to being satisfied. Furthermore, uncertainty has an attenuating effect on both positive and negative deviations of actual performance from subjective reference points. Put differently, a bad performance feels less bad and a good performance feels less good when it is expected, compared with unexpected. The authors find support for the model's predictions in an experimental study on product delivery as well as a field study based on online reviews. In addition, the authors develop a model-based tool that predicts the effect of uncertainty on customer satisfaction across different customizable scenarios. The paper's results carry implications for firms' communication, customer valuation and recovery strategies.
Keywords:
customer satisfaction; uncertainty; probabilistic beliefs; prospect theory;
JEL-Classification:
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Discussion Paper No. 331
July 7, 2022
Charitable Giving by the Poor A Field Experiment in Kyrgyzstan
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In a large-scale natural field experiment, we partnered with a micro-lending company in Kyrgyzstan that asked over 180,000 of its clients for donations to social projects as a form of corporate philanthropy. In a 2×2 design, we explored two main (pre-registered) hypotheses about giving by the poor. First, based on a conjecture that poor are more price sensitive than the rich and in contrast to previous studies, we hypothesize that matching incentives induce crowding in of out-of-pocket donations. Second, we hypothesize that our population cares about their proximity to the charitable project. We find evidence in favor of the former hypothesis but not the latter. Previous studies of charitable giving focus on middle- or high-income earners in Western countries, neglecting the poor, although the lowest income groups are often shown to contribute substantial shares of their income to charitable causes. Our results challenge the evidence in the extant literature but are in line with our theoretical model. The implications for fundraising managers are that the optimal design of fundraising campaigns crucially depends on the targeted groups, and that donation matching is successful in stimulating participation in poorer populations.
Keywords:
charity giving; field experiments; matching donations;
JEL-Classification:
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Discussion Paper No. 328
May 12, 2022
Personalized Fundraising: A Field Experiment on Threshold Matching of Donations
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We study a form of threshold matching in fundraising where donations above a certain threshold are topped up with a fixed amount. We show theoretically that threshold matching can induce crowding in if appropriately personalized. In a field experiment, we explore how thresholds should be chosen depending on past donations. The optimal choice of thresholds is rather bold, approximately 75% above past donations. Additionally, we explore how thresholds should be set for new donors as a function of their personal characteristics and demonstrate the benefits of personalization as opposed to setting a general threshold that applies to all recipients of a fundraising call.
Keywords:
charitable giving; field experiments; matching donations; personalization;
JEL-Classification:
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Discussion Paper No. 326
May 5, 2022
Voluntary 'Donations' versus Reward-Oriented 'Contributions': Two Experiments on Framing in Funding Mechanisms
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In an artefactual field experiment, we implemented a crowdfunding campaign for an institute's summer party and compared donation and contribution framings. We found that the use of the word 'donation' generated higher revenue than the use of 'contribution'. While the individuals receiving the donation framing gave substantially larger amounts, those receiving the contribution framing responded more strongly to reward thresholds and suggestions. An additional survey experiment on MTurk indicated that the term 'donation' triggers more positive emotional responses and that emotions are highly correlated with giving. It appears that making a donation is perceived as a more voluntary act and is thus more successful at generating warm glow than making a contribution. We surmise that this extends to other funding mechanisms.
Keywords:
crowdfunding; field experiment; framing;
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