Frontiers: The Effect of an Ad Ban on Retailer Sales: Insights from a Natural Experiment

A natural experiment reveals that an ad ban reduces sales of a grocery retailer by 6% but does not affect overall market size. Advertising bans typically target products that deceive consumers in ways that can threaten their physical and mental health. An alternative policy objective might seek envi...

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Bibliographic Details
Published in:Marketing science (Providence, R.I.) R.I.), 2024-07, Vol.43 (4), p.723-733
Main Authors: Gabel, Sebastian, Molitor, Dominik, Spann, Martin
Format: Article
Language:English
Subjects:
Advertising
advertising ban
advertising effectiveness
Bans
Consumer behavior
Consumers
COVID-19
Customers
Environmental protection
Health status
Immunization
Leaflets
Mental health
Mobility
natural experiment
Pandemics
Panel data
Print advertising
Promotional products
Retail stores
retailing
Retailing industry
Sales
Sales promotions
Suspension
sustainability
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Summary:A natural experiment reveals that an ad ban reduces sales of a grocery retailer by 6% but does not affect overall market size. Advertising bans typically target products that deceive consumers in ways that can threaten their physical and mental health. An alternative policy objective might seek environmental protection through a ban on print advertising. Such measures would profoundly affect grocery retailers relying on printed leaflets to communicate weekly promotions. We measure the causal effect of banning advertising on retail performance by studying a temporary advertising ban implemented in a German federal state during the COVID-19 pandemic. The ban resulted in the suspension of all print advertising by grocery retailers, and the exogenous variation in advertising created by this natural experiment serves as our identification strategy. We apply difference-in-differences regressions to data from a national grocery retailer and find that the ban resulted in a 6% sales decrease in the treated state compared with an adjacent state. GfK Household Panel data reveal no effect of the advertising ban on the market level but a negative impact on retailers offering and advertising weekly promotional product assortments. We study the sensitivity of these results to the COVID pandemic and find that neither changes in COVID-19 incidence, vaccination rates, nor customers’ mobility moderate the ad ban effect. The findings offer practical insights for regulators and retailers regarding the impact of ad bans and the value of advertising. History: Catherine Tucker served as the senior editor for this article. This paper was accepted through the Marketing Science : Frontiers review process. Conflict of Interest Statement: None of the authors have any financial or non-financial interests in this manuscript’s subject matter or materials. Sebastian Gabel consults with a company linked to the retailer that provided the data. Access to the GfK Household Panel data is provided by AiMark ( http://www.aimark.org ), which is a not-for-profit foundation that supports top academic research with scanner data provided by its data partners GfK and Kantar. Funding: This work was supported by Deutsche Forschungsgemeinschaft (CRC TRR 190 [Project Number 280092119]) and Nederlandse Organisatie voor Wetenschappelijk Onderzoek. S. Gabel acknowledges funding from the Dutch Research Council (NWO) under a Veni grant. M. Spann acknowledges funding from the German Research Foundation. Supplem
ISSN:0732-2399
1526-548X
DOI:10.1287/mksc.2023.0019