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«Original Citation: Acquisti, Alessandro and Spiekermann, Sarah (2011) Do Interruptions Pay Off? Effects on Interruptive Ads on Costumers’ ...»

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ePubWU Institutional Repository

Alessandro Acquisti and Sarah Spiekermann

Do Interruptions Pay Off? Effects on Interruptive Ads on Costumers’

Willingness to Pay

Article (Accepted for Publication)

(Refereed)

Original Citation:

Acquisti, Alessandro and Spiekermann, Sarah (2011) Do Interruptions Pay Off? Effects on

Interruptive Ads on Costumers’ Willingness to Pay. Journal of Interactive Marketing, 25 (4). pp.

226-240. ISSN 1094-9968

This version is available at: http://epub.wu.ac.at/3317/ Available in ePubWU : December 2011 ePubWU, the institutional repository of the WU Vienna University of Economics and Business, is provided by the University Library and the IT-Services. The aim is to enable open access to the scholarly output of the WU.

This document is the version accepted for publication and — in case of peer review — incorporates referee comments. There are minor differences between this and the publisher version which could however affect a citation.

http://epub.wu.ac.at/ This paper will be published in Journal of Interactive Marketing, 2011 (forthcoming) Do Interruptions Pay Off?

Effects of Interruptive Ads on Consumers’ Willingness to Pay Alessandro Acquisti & Sarah Spiekermann We present the results of a study designed to measure the impact of interruptive advertising on consumers’ willingness to pay for products bearing the advertiser's brand. Subjects participating in a controlled experiment were exposed to ads that diverted their attention from a computer game they were testing. We found that ads significantly lowered subjects’ willingness to pay for a good associated with the advertised brand. We did not find conclusive evidence that providing some level of user control over the appearance of ads mitigated the negative impact of ad interruption. Our results contribute to the research on the economic impact of advertising, and introduce a method of measuring actual (as opposed to self-reported) willingness to pay in experimental marketing research.

Keywords: Advertising, Attention, Privacy, Willingness to Pay, Electronic commerce.

Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 2

INTRODUCTION

In markets where information abounds, attention is a scarce resource that businesses compete for with increasing fierceness. Every day, the average consumer is confronted with more than 3,000

advertising messages (Speck and Elliott 1997) distributed across a variety of media channels:

billboards in public spaces, printed media, television, the Internet, as well as mobile handsets and computer games. With the multiplication of media channels and the increasing sophistication of information systems, advertising messages often compete for attention by interrupting a vast array of consumers’ activities. Online, interruptions of many forms (interstitials, embedded videos or flash animations, pop-up windows, and so forth) obstruct the view of a website; offline, movies are frequently interrupted by commercials; outdoors, sport events are halted to make room for a sponsor’s featured presentation.

Interruptive marketing practices have been recognized as beneficial for advertisers. Ads increase consumers’ brand recall, recognition, and awareness. Heightened recall and awareness, in turn, positively affect sales (Barry and Howard 1990; Yoo, Kim and Stout 2004). On the other hand, aggressively pursuing and consuming consumers’ attention can be perceived as an invasion of someone’s privacy (defined, in Warren and Brandeis 1890’s seminal article, as an individual’s ‘right to be left alone’), and thus backfire. Advertising systems that interfere with or interrupt an individual’s primary task can cause negative attitude formation and increase annoyance, leading to ad avoidance (Cho and Cheon 2004; Edwards, Li and Lee 2002).

However, the impact that such interruptions have on consumers’ actual purchase behavior – and in particular on their willingness to pay for an aggressively advertised product (namely, their reservation prices) - has not yet been conclusively determined in the marketing literature.

Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 3 Previous scholarship on the economic impact of interruptive advertising explored numerous dependent variables (from brand equity to buying interest and click-through behavior (Chandon, Chtourou and Fortin 2003; Cho and Cheon 2004; Lohtia, Donthu and Hershberger 2003;

Pieters, Warlop and Wedel 2002; Shapiro, Macinnis and Heckler 1997; Yaveroglu and Donthu 2008), but not actual (as opposed to self-reported) reservation prices. The very impact of advertising on sales revenues (which are function of consumers’ reservation prices) is still debated (Lewis and Reiley 2009). Our manuscript attempts to fill this gap by introducing and applying methodologies from behavioral and experimental economics in order to estimate consumers’ WTP for branded products as function of their exposure to the brand’s advertising.

In addition, we investigate whether granting consumers some level of control over the interruptive ads mediates the impact of the advertising message. One distinguishing characteristic of interactive marketing is, in fact, the higher degree of consumer’s control over the ads. The balance between consumers’ and managers’ control of marketing messages is a major issue in new media environments (Winer 2009). Companies aim at controlling the exposure of consumers to messages, but struggle to do so as new technologies allow consumers to avoid ads (Deighton and Kornfeld 2009). In our experiment, we differentiated between the impact on WTP of ads that are controllable (such as those that can be clicked off a screen) and those that are uncontrollable (in the sense that they force consumers’ attention).





In order to test the impact of interruptive ads on willingness to pay, we recruited subjects to – ostensibly – evaluate the desktop prototype version of a new computer game (their primary task). The game was interrupted by either controllable or uncontrollable advertising messages (a scenario similar to interstitials interrupting online browsing, but extendable in principle to other instances where consumers’ attention is diverted from a media-rich primary task). At the Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 4 beginning of the experiment, all subjects received a mug branded with an ad. The ad contained the logo and name of a (unbeknownst to the subjects, fictional) company. In some experimental conditions, this ad was identical to the ad that appeared on the subjects’ screens during the game.

Following the completion of the game, all subjects were offered to purchase the mug. We measured subjects’ willingness to pay (WTP) for the branded mug using an incentive-compatible mechanism. Two weeks after the experiment, we also measured their recall and recognition of the advertising brand through an online survey. We found that having a brand advertised both on the mug and during the game lead to the positive memory effects recognized in the marketing literature. However, interrupting subjects’ primary task with ads incurred a penalty: The willingness to pay for the mug associated with the interrupting brand was as much as 30 percent lower than when the same brand was not advertised during the game. We did not find conclusive evidence that providing some level of user control over the appearance of ads can mitigate the negative impact of ad interruption.

Our findings confirm that aggressive advertising may raise awareness for a company’s brand, but also suggest that – especially in information dense e-commerce contexts, and whenever consumers are expected to make immediate purchase decisions – interruptive ads may negatively affect a company’s bottom line.

Our manuscript therefore contributes to the marketing literature in two ways. First, we contribute to the growing literatures on new media marketing (Winer 2009) as well as privacy economics (see, for instance, Acquisti and Varian 2005) by examining the purchase effect of intrusive marketing strategies. Second, we introduce a method for measuring consumers’ actual WTPs for branded products (as opposed to self-reported purchase intentions or attitudinal metrics) based on the Becker-DeGroot-Marschak (1964) method (or “BDM,” hereafter: Becker, Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 5 Degroth and Marashak 1964), regularly employed in experimental economics (see, for instance, Plott and Zeiler 2005), and methodologies from behavioral economics (in particular, one derived from a seminal study of the endowment effect by Kahneman, Knetsch and Thaler 1990).

–  –  –

In principle, the goal of all advertising messages is to attract consumers’ attention. To do so, some ads interfere with and interrupt their activities. Interruptions are events that lead to a “cessation and postponement of ongoing activity” (p. 169 in Zijlstra et al. 1999) and break the continuity of an individual’s cognitive focus (Corragio 1990). Interruptions can be created by another person, object, or event, at moments that are, in general, beyond the individual’s control.

Such is the case with many advertising messages, and the focus of our research.

The old saying that any publicity is good publicity illustrates the belief that, even if viewers respond negatively to forced advertising exposure, they are still being exposed to the message, which will positively impact purchases. Ads do increase consumers’ brand recall (De Pelsmacker, Geuens and Anckaert 2002; Mehta 2000; Yoo et al. 2004), recognition (Drèze and Hussherr 2003), and awareness (Pieters et al. 2002), and can foster positive attitudes towards brands (Burns and Lutz 2006; Cho and Cheon 2004; De Pelsmacker et al. 2002), translating into increased sales (Barry and Howard 1990; Yoo et al. 2004). Deighton, Henderson and Neslin (1994) describe this chain of cognition of an ad, attitude formation, and purchase behavior, as a hierarchy-of-effects (Aaker and Day 1974).

However, advertising interruptions can also elicit adverse reactions. Interrupting ads can cause negative attitude formation (Hong, Thong and Tam 2004; Louisa 1996; Wang and Calder Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 6 2006), evoke feelings of intrusion and irritation (Edwards et al. 2002), and push individuals to cognitively and behaviorally avoid advertising messages (Abernethy 1991; Cho and Cheon 2004;

Edwards et al. 2002; Speck and Elliott 1997). For online environments, focus-group based research has found that consumers see Internet ads as disruptive (Rettie 2001). While pop-up advertisements are 50% more likely to be noticed than banner ads, they are twice as likely to be considered intrusive (StatisticalResearch 2001). Visitors to a website are less likely to return when their experience has been interrupted by a pop-up (McCoy et al. 2007).

Attention research shows that, as interruptions can come in multiple forms, they can cause varying reactions among people. How an individual will react to the interruption depends on the control she has upon it (Mc Farlane 2002), on the content similarity between an interruption and the primary task in the advertising literature (which is referred to as ad congruency; see Moore, Stammerjohan and Coulter 2005; Yaveroglu and Donthu 2008), as well as on whether the interruption occurs while one is deeply engaged in a task goal or finds herself at natural breakpoint between tasks (Bailey and Iqbal 2008; for an overview of the literture, see Spiekermann and Dabbish 2010). In the field of marketing, reactions to advertising interruptions are typically measured through memory effects, such as recall or recognition of ads or advertised brands.

However, surprisingly little is known about the impact that advertising interruptions have on consumers’ willingness to pay for the advertised products. In microeconomic theory, a consumer is believed to purchase a good only when her reservation price (the maximum amount of money she is willing to pay to purchase unit[s] of that good) is equal to or larger than the price at which the good is sold. Willingness to pay (WTP), therefore, plays a crucial role in the field of marketing, both as an indicator of customer satisfaction for a given product (Homburg, Koschate Pre-Pub Version; A. Acquisti & S. Spiekermann Journal of Interactive Marketing, 2011 7 and Hoyer 2005), and as a way to determine what price a company will be able to charge for its products. Yet, to our knowledge, no controlled experiment has uncovered the impact of consumers’ attention-consuming advertising on their actual reservation prices. Marketing research often relies on self-reported purchase intentions, attitude measures, or – at best – clickstream and panel data to estimate the impact of advertising campaigns. While useful, these measures suffer from drawbacks when applied to the estimation of the impact an advertising campaign has on consumers’ actual willingness to pay. Scanner panel data establish links between “eyeballs’’ and purchase volume (mostly at the household level), but typically cannot record the details of individual purchases. Panel data only allow researchers to observe brand choice in terms of brand switching behavior (Deighton et al. 1994) or repeat purchases (Manchanda et al. 2006; Pedrick and Zufryden 1991). Also, panel data suffer from a disadvantage common to field data, in which many covariates (such as brand loyalty – see Tellis 1988) – or multiple household decision makers) interact with purchase behavior, sometimes in an uncontrollable manner. Clickstream data (Chatterjee, Hoffman and Novak 2003; Manchanda et

al. 2006) do not necessarily predict purchases (as online purchase conversion rates are so low:

Moe and Fader 2004) and therefore cannot reliably predict WTP. As for self-reported intentions to purchase, or metrics of attitudes towards a product or a brand (for instance, Nelson, Meyvis and Galak 2008 use self-reported measures of WTP for a movie which was interrupted), they are weaker measure of ad success (and of its impact on WTP) than actual purchases, since consumers often claim an intention to purchase products that they will not actually buy (Juster 1966; Manski 1990).



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