Over-Paid Search: When Bricks-and-Mortar Retailers Should Not Use Paid Search

Over-Paid Search: When Bricks-and-Mortar Retailers Should Not Use Paid Search

Current research on paid search highlights its ability to enhance online as well as offline sales but is limited to pure online players and multi-channel firms. This paper presents a controlled field experiment which investigates whether paid search can increase sales for bricks-and-mortar retailers who solely sell their products via local stores and rely on informational websites to reach their customers. Results suggest that paid search increases the number of potential customers by enhancing the reach of online marketing initiatives. Yet, using a difference-in-differences analysis, our findings show that paid search fails to increase offline sales. Local store customers primarily use paid search as a navigational shortcut to the chain’s website which they would have reached even without being exposed to paid search. Consequently, bricks-and-mortar retailers should approach paid search cautiously: whilst it can enhance the reach of marketing initiatives, it seems to have little effect on improving offline purchases.