What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment

Firms spend billions of dollars developing advertising content, yet there is little field evidence on how much or how it affects demand. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized advertising content, loan price, and loan offer deadlines simultaneously. We find that advertising content significantly affects demand. Although it was difficult to predict ex ante which specific advertising features would matter most in this context, the features that do matter have large effects. Showing fewer example loans, not suggesting a particular use for the loan, or including a photo of an attractive woman increases loan demand by about as much as a 25% reduction in the interest rate. The evidence also suggests that advertising content persuades by appealing “peripherally” to intuition rather than reason. Although the advertising content effects point to an important role for persuasion and related psychology, our deadline results do not support the psychological prediction that shorter deadlines may help overcome time-management problems; instead, demand strongly increases with longer deadlines.

Policy implications

Advertising content is a key aspect to consider in encouraging take up of any intervention. Predicting the impact of advertising content can be a challenge without greater detail on specific contexts.

Additional information

Hypotheses/research question

Advertising theory suggests that advertising content, including framing, cues, and product presentation, matters for purchasing decisions, and especially in relation to the consumers' context. Furthermore, deadlines and prices are expected to be important drivers of consumer choice. The effects of creative content, offer deadlines, and price on consumer choice, as well as the relative importance of each one, is critical to the design of marketing strategies. It is difficult to predict ex-ante which types of variations of creative content affect demand, but the premise of psychology - context matters - suggests that types and magnitudes of content effects require field experiments on a broad scale. In contrast to standard models that predict that consumers will always (weakly) prefer the longest available deadline, the authors' hypothesis aligns with some previous research that suggests that individuals often choose to impose shorter deadlines on themselves even when longer ones exist in the choice set. Standard models predict that consumer demand and price are inversely related, and that price sensitivity is related to the essentiality of the product.

Study design

Parallel-group

The sample frame consisted entirely of experienced clients of one of South Africa's most profitable consumer lenders which specialised in loans for the working poor. Each of the 53,194 solicited clients had borrowed from the Lender within 24 months of the mailing date, but not within the previous 6 months.

Cost benefit ratio

Not available.

Rounds of data collection

3: Baseline + 2 follow-ups

Baseline data collection and method

The cooperating consumer lender offered data on its past clients, including their credit history, credit risk, and demographics.

Data collection method and data collected

Measures of Demand: Take-up decision (decision to apply for a loan before the deadline in their local branch); Obtaining a loan; Amount borrowed; Loan amount maturity. (These data are all tracked by the cooperating lender.) Other Outcomes: Outside borrowing (using credit bureau data); Repayment behaviour (tracked by the cooperating lender).

Unit of analysis

Individual

Stratification

Yes: The interest rate randomisation was stratified by the client's pre-approved risk category because risk determined the loan price under standard operations.

Reference

Bertrand, M., Karlan, D., Mullainathan, S., Shafir, E., & Zinman, J., 2010. 'What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment'. The Quarterly Journal of Economics, vol. 125 (1), pages 263-306.

What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment

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