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Offline compared to online retail is still actually a very large faction of consumer
spending.
So, although online is growing quite dramatically, as of now essentially still
about 90% of retail spending happens in the offline world.
And firms are still trying to figure out how to best promote products,
how to best run a price promotions, things of that sort.
And so, we wanted to go back and see, can we actually use tools
that we learned about in the online world, better types of measurement.
And can we bring that back to the offline world, and try to track things better?
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So we know if I run an ad online, I typically can track,
did somebody click on it, did they again go to my website, how much they spend.
All this linkage is much closer, and
those are often things that we don't observe in the offline world.
Right, so an online retailer would know,
how did this consumer get to the product he ultimately purchased?
We can observe their browsing with a lot of precision,
offline there's usually no equivalent.
Traditionally, we weren't able to see how did somebody walk through the store?
How did they actually get to the specific aisle, where they then picked up products?
And so,
what we do in the study is we actually bring in a new measurement tool that's
going to mimic the way we can observe things online, in the offline world.
And in particular what we going to do is we're going to rig
consumer shopping carts, if you will, with so
called radio frequency identification tags which work like a GPS tracker, that allow
us to track exactly how does somebody walk through the store, which categories.
Do they walk past, what do they eventually end up purchasing?
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If in a particular week the supermarket is running a beer add do more people
buy beer?
That we were usually able to observe even before, but
now we can also see that actually more people go to the beer isle.
So, did that advertising attract people to go to different part of the store that
they wouldn't have otherwise gone to, and then they made the purchase?
If that's true,
then maybe this advertising will have positive spillovers to other categories.
Maybe people on their way to the beer aisle are now going to pick up
salty snacks, other things.
And so there's sort of, anecdotally,
a lot of that sense that we are going to get these kind of spillover effects.
So people often talk about the fact that milk gets stored in the back of the store.
Why, because people buy it very frequently, and
having it in the back of the store makes them walk past a lot of other categories.
And hence, they might pick up other things that they didn't plan on
buying on their way.
And so you could imagine that advertising does something very similar.
If advertising allows me to divert traffic to other parts of the store, then
maybe products I pass on that way are also going to end up in my purchase basket.
And so that was something that we weren't usually able to observe.
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So for a store manager, the good news here is that advertising is quite effective
beyond just the individual product being advertised.
So what we find is that, when you advertise a particular brand of beer,
sales go up in the beer category as a whole.
And that increase comes partly from the advertised brands, but
also goes beyond that.
So some consumers presumably just pick up on the fact
beer is being advertised today.
They get reminded of I want to buy beer, and
hence we see an increase in beer sales.
And that's beyond the individual product being advertised.
At the same time we also find that the effect stops there.
So to the extent that stores might have to hope that driving more people beer isle
through advertising will then spin over in to higher sales for salty snacks, or
other categories that are stocked nearby, we find no evidence for that whatsoever.
So we think stop at category level, but
they go beyond the individual product being advertised.
And so hence as we think about allocating advertising budget,
thinking about effectiveness on the level of the product category,
rather than the more narrow product level or the broader store level,
seems to be the right way to tackle that managerial decision.
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