UCL School of Management is delighted to welcome,Shirsho Biswas, University of Chicago,to host a research seminar discussing  ‘Investigating the effects of including discount information in advertising’

 

Consider a display ad for a new pizza brand that announces a discount. Such discount advertising mentions the brand and often shows a picture of the product, thus informing consumers of the brand and some characteristics (the `brand advertising effect’). It also highlights a discount, thus informing consumers of the existence of a discount (the `pure promotion effect’). There could be a third effect, the `discount spotlighting effect’ - a reduction in brand preference from discount advertising that arises from the brand choosing to highlight a discount in its advertising and marketing itself based on low price. These three effects are typically confounded and, in particular, the `discount spotlighting’ effect has not been studied before. Two identical consumers, one who has seen a brand ad and then found out about the discount separately, and another one who has seen a discount ad, have the same information about the brand and the discount. However, they will have different probabilities of purchase due to the `discount spotlighting’ effect. I demonstrate the existence of this effect by designing and implementing a field experiment on a food delivery app with exogenous variation in advertising intensity, the presence of discount information in ads, and discount level for a focal restaurant. More broadly, I use this experiment to investigate the differences in the effects of ads with and without explicit discount information (`discount ads’ and `brand ads’) on (1) demand, (2) the different stages of the purchase funnel (menu page; cart page; purchase), and (3) non-advertised rivals. I show that discount oriented advertising can induce more consumers to search for the advertised product, but reduces conversion conditional on search for a given consumer. Managerial implications are discussed.