“The Effect of Price Rank on Clicks and Conversions in Sponsored Keyword Advertising in Online Retailer’s Website” by Mr. Mengzhou Zhuang
Mr. Mengzhou Zhuang
Ph.D. Candidate in Marketing
Gies College of Business
University of Illinois at Urbana-Champaign
Keyword sponsored advertising serves as a channel for firms to communicate with consumers. Noting the critical role of price information in consumers’ decision making, this study investigates product price as a factor that affects consumers’ responses to such advertising, along with the moderating effects of two keyword attributes. With a hierarchical Bayesian model, the authors analyze a unique data set from a leading electronic shopping platform and find that consumers tend to click more on extreme price options (i.e., highest or lowest), which serve as anchors to evaluate a broad range of options. This effect is diminished among advertisements sponsoring more specific keywords but enhanced among those using more popular keywords. Yet conversion rates are higher for the moderately priced options, which offer a compromise across different product features. This effect weakens for more specific keywords but strengthens for more popular keywords. The findings provide new insights on the role of price information in sponsored keyword advertising, along with managerial implications for devising effective sponsored keyword advertising strategies.