February 9, 2017 Leave a comment
The question of whether or not online ads are a worthwhile investment is one that plagues many companies. Unless customers are clicking on ads and those ads are directly resulting in a sale, its hard to gauge whether or not they’re beneficial. That’s where statistics and experiments come in, which can help make more sense of online advertising. But there’s still a gap in the data, namely, how do you know if online ads are working if the vast majority of your sales are in-store?
To investigate that question, researchers from the University of Rochester, Netflix, and Pandora worked with Yahoo! and an unspecified clothing retailer to figure out how effective that retailer’s online ads were. It turns out that, according to the data, they’re pretty effective. On average, the ads increased revenue by 3.6%.
While that may not sound like a lot, it’s actually about three times what the company spent on those ads, which is a really good return on investment. What’s really interesting though, is that about 84% of in-store sales increases came directly from online ads. In other words, the ads were working and driving people to the physical stores, instead of driving them to the online store.
There are likely a few reasons behind that, which may not be applicable to all retailers. Shopping for clothes is, generally speaking, a more personal experience than shopping for home goods or books. Buying clothes generally requires trying them on, unless you have a very good understanding of how a specific company sizes and cuts their clothing.
So while people might buy books and movies online with no worry, a lot of them seem to be still buying clothes in stores. But the online advertisements are still working, because those same people are spending enough time online that this is where the ads are having the most effect.