Advertising as a Reminder: Evidence from the Dutch State Lottery

Abstract

We use high frequency data on TV and radio advertising together with data on online sales for lottery tickets to measure the short run effects of advertising. We find them to be strong and to last for up to about 4 hours. They are the bigger the less time there is until the draw. We develop the argument that this finding is consistent with the idea that advertisements remind consumers to buy a ticket and that consumers value this. Then, we point out that in terms of timing the interests of the firm and the consumers are aligned: consumers wish to be reminded in a way that makes them most likely to consider buying a lottery ticket. We present direct evidence that this does not only affect the timing of purchases, but leads to market expansion. Then, we develop a tractable dynamic structural model of consumer behavior, estimate the parameters of this model and simulate the effects of a number of counterfactual dynamic advertising strategies. We find that relative to the actual schedule it would be valued by the consumers and profitable for the firm to spread advertising less over time and move it to the last days before the draw.

Immediate Responses of Online Brand Search and Price Search to TV Ads

“…Since then, several studies have found a similar positive effect of TV ads on online search (Chandrasekaran, Srinivasan, and Sihi 2018; Hill, Burtch, and Barto 2017; Joo et al 2014; Joo, Wilbur, and Zhu 2016; Laroche et al 2013; Lewis and Reiley 2013). Further research has shown that TV ads lead to other online responses as well, including brand website traffic (Kitts et al 2014; Liaukonyte, Teixeira, and Wilbur 2015), online word of mouth (WOM; Fossen and Schweidel 2017; Konitzer et al 2019; Tirunillai and Tellis 2017), and online conversions (Guitart and Hervet 2017; He and Klein 2018). These results stem from various types of analyses using monthly, weekly, daily, hourly, or minute-level data.…”

“…Second, most of the existing studies measured advertising exposure using either ad expenditures (Hill, Burtch, and Barto 2017; Hu, Du, and Damangir 2014; Joo et al 2014; Joo, Wilbur, and Zhu 2016; Laroche et al 2013) or ad gross rating points (Guitart and Hervet 2017; He and Klein 2018), which are typically measured at the telecast or quarter-hour level. To the best of our knowledge, we are the first to use spot-level ad audience size data in quantifying the rate of immediate online response to regular TV ads.…”