Driving online and offline sales: The cross-channel effects of traditional, online display, and paid search advertising

The current marketing environment is characterized by a surge in multichannel shopping and increasing choice of advertising channels. This situation requires firms to understand how advertising in one channel (e.g., online) influences sales in another channel (e.g., offline). This article studies the presence, magnitude, and carryover of these cross-channel effects for online advertising (display and search) and traditional media. The analysis considers how these advertising
expenditures translate directly into sales, as well as indirectly through
intermediate search advertising metrics—namely, impressions and clickthrough
rate. For a high-end clothing and apparel retailer, the authors find that cross effects exist and are important and that cross-effect elasticities are almost as high as own-effect elasticities. Online display and, in particular, search advertising is more effective than traditional advertising. This result is primarily due to strong cross effects on the offline channel. Return-on-investment calculations suggest that by ignoring these cross effects, firms substantially miscalculate the effectiveness of online advertising. Notably, the authors find that
traditional advertising decreases paid search click-through rates, thus reducing the net cross effect of traditional advertising.