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Effects of Targeted Promotions: Evidence from Field Experiments

Effects of Targeted Promotions: Evidence from Field Experiments

By Navdeep S. Sahni, Dan Zou, Pradeep Chintagunta
November 24,2014Working Paper No. 3243

The prevalence and widespread usage of email has given businesses a direct and cost effective way of providing consumers with targeted promotional offers. While targeted promotions are expected to increase the demand for the promoted products, are these promotions effective in increasing revenues? Do they have effects beyond acting as price reductions? We study these questions using individual-level data from 70 randomized experiments run by a large online ticket resale platform. We measure the impact of emailed promotions by comparing purchases by individuals who received the experimental promotions with purchases by those who did not receive the offers because of the experimental randomization. We find that the offers cause the average expenditure to increase by $3.03 (a 37.2% increase) during the promotion window. However, ninety percent of these gains are not through redemption of the offers. Interestingly, the promotion causes carryover to the week after the promotion expires; we find that spending increases by $1.55 in the week after the offer expires. Additionally, we find evidence for cross category spillovers to non-promoted products - offers not applicable to a ticket genre cause an increase in spending in that genre. We conclude that emailed promotions can serve as a form of “advertising” for the firm’s products.