Contrary to popular marketing wisdom, online banner ads are effective, says new analysis by University of Chicago researchers. “Banner ads have a reminder effect on customers,” says Jean-Pierre Dube, assistant professor in the Graduate School of Business at the University of Chicago. “People who are depressed by low click-through rates of banners should relax a bit. Even people who aren’t clicking through are getting exposure.”
Seeking to determine the effect of banner ads on existing customers, University of Chicago researchers reviewed the transaction logs of an unnamed online retailer of health and beauty products and over-the-counter drugs. The study showed that customers’ behavior is affected by how often they saw banner ads and how recently they saw them.
The research team identified three categories of customers: loyal but infrequent customers who shopped at this particular retailer once every 63 days; regular and frequent shoppers who shopped once every 12 days; and impulse shoppers who shop frequently but tend to react to advertising.
The loyal but infrequent shoppers could be enticed to shop a day sooner simply by exposure to the average number of ads that everyone in the group saw. Lengthening the time between when the ads were viewed added 20 days to the time between shopping trips. It took a greater number than the average number of ads to move the regular and frequent shoppers’ time between purchases but lengthening the time between ads added 18 days to their time between trips. Increasing the number of ads that the impulse buyers viewed increased their shopping trips by 49%. Lengthening the time between ads did not affect their frequency, since their shopping behavior is in response to ads to begin with.
“It always seemed odd that online marketers didn’t apply the same logic to Internet advertising that they applied to TV advertising, where they’re willing to pay millions of dollars for the impressions that TV ads create yet where there’s no click-through possibility at all,” says Dube, who teaches a course on Internet marketing strategies. “Our paper shows that banners create impressions and have a reminder effect on existing customers.”
The most effective ad were those that were part of a consistent campaign across a number of different sites, Dube says. The group’s research shows a variety of ads for the same retailer actually depresses response because the variety confuses the customer, Dube says.
Dube and his colleagues will present their findings this weekend at the 2002 Marketing Science Conference, sponsored by the Institute for Operations Research and the Management Sciences College on Marketing at the University of Alberta.