Achieving More by Paying Less? How Bricks-and-Mortar Retailers Can Benefit by Bidding Less Aggressively in Paid Search

Current research on paid search highlights its ability to enhance both online and offline conversions. Yet, research investigating the impact of placing paid search ads on less prominent positions on subsequent consumer behavior is limited to the online environment. This paper presents a field experiment using differences-in-differences analysis to investigate whether the targeting of a less prominent ad position can be beneficial for bricks-and-mortar retailers. Results indicate that paid search advertising budgets could be allocated more efficiently by targeting less prominent ad positions, thus allowing bricks-and-mortar retailers with a limited marketing budget to increase the reach of their marketing campaign, attract more consumers to their website and achieve an overall increase in conversions. Furthermore, the pay-per-click billing mechanism allows advertisers to increase their marketing reach at no additional cost. Consequently, bricks-and-mortar retailers should consider targeting less prominent ad positions to reduce advertising costs while simultaneously enhancing advertising benefits.