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When Online Engagement Gets in the Way of Offline Sales: A Natural Experiment

May 09, 2016

Dr. Sagit Bar-Gill (MIT IDE) and Dr. Shachar Reichman (MIT IDE and TAU)

E-commerce platforms and brand websites have become an integral part of almost any consumption process, and both online and offline retailers have been focusing their efforts on improving their online presence and enhancing firm websites. One of the challenges still faced by researchers and practitioners alike is to understand and measure the end effect of web presence on offline sales, and how it is mediated by the effect on online consumer behavior. Online engagement and information gathering serves as a substitute to offline information acquisition, while also complementing offline consumption processes by increasing the probability that a consumer arrives at a store or dealership, and by increasing conversion rates offline. In this research, we exploit a natural experiment setting, to study the effect of the launch of a new interactive website by a leading automaker, on the brand’s offline car sales. We find that website launch lead to a decrease in sales, as online engagement lead to a decrease in sales leads and subsequent dealership contact. Our setting provides a unique opportunity to identify a causal effect of online engagement on offline sales. Furthermore, the research offers a practical contribution – the negative effect we identify suggests that managers should be cautious in setting high online engagement goals for offline products and services.