Mapping spatial heterogeneity in retail advertising effectiveness

Location-based advertising is increasingly prevalent thanks to advanced data tracking and targeting infrastructure. By combining TV ad viewership data with mobile location data of 6.4 million users, we study spatial heterogeneity in retail advertising effectiveness in the home improvement industry. The granularity of user locations that goes beyond the targeting capabilities of traditional TV ads allows us to identify spatially heterogeneous effects. Contrary to the conventional focus on radius-based targeting, we find that spatial heterogeneity is more nuanced. First, geo-competitive structure plays an important role in determining advertising effectiveness, with the proximity of a store relative to its rival serving as a significant moderator. Second, advertising effectiveness has an inverted U-shaped relationship with a customer’s distance to the store, reflecting differences in customer information. Moreover, spatial heterogeneity varies across ad types: price-promotional ads tend to influence customers closer to the store and steal rival traffic, compared to non-promotional ads. Overall, our findings offer valuable insights for location-based advertising strategies and platform targeting design.