Authors: Marianne Bertrand, Dean Karlan, Sendhil Mullainathan, Eldar Shafir and Jonathan Zinman.
Publication: The Quarterly Journal of Economics (2010) 125 (1): 263-306.
Abstract: Firms spend billions of dollars developing advertising content, yet there is little ﬁeld evidence on how much or how it affects demand. We analyze a direct mail ﬁeld experiment in South Africa implemented by a consumer lender that randomized advertising content, loan price, and loan offer deadlines simultaneously. We ﬁnd that advertising content signiﬁcantly affects demand. Although it was difﬁcult to predict ex ante which speciﬁc advertising features would matter most in this context, the features that do matter have large effects. Showing fewer example loans, not suggesting a particular use for the loan, or including a photo of an attractive woman increases loan demand by about as much as a 25% reduction in the interest rate. The evidence also suggests that advertising content persuades by appealing “peripherally” to intuition rather than reason. Although the advertising content effects point to an important role for persuasion and related psychology, our deadline results do not support the psychological prediction that shorter deadlines may help overcome time-management problems; instead, demand strongly increases with longer deadlines.