Effectiveness of Location-Based Advertising and the Impact of Interface Design.

Offline retailers increasingly use location-based coupons to target consumers in their vicinity in real-time. The rationale for the use of location-based coupons is that geographic proximity increases the relevance for consumers and, thus, the effectiveness of these campaigns. Two key interface-specific aspects of location-based coupon applications that influence their effectiveness are 1) the provision of distance information and 2) the distance-based ranking of coupons. The aim of this paper is to study and quantify the impact of these two key aspects of interface design on the effectiveness of location-based coupons. We conduct a randomized field experiment with 399,913 observations, including 3,499 different coupon promotions offered by 3,930 different stores located in 2,392 ZIP code areas in a large Western European country. Our results show that the most effective interface design for location-based coupons is based on a distance-based ranking. Furthermore, we find significant differences in the impact of distance and display rank based on the interface design and the actual geographic location of users. Our results thus contribute to the understanding of consumers' behavioral responses to location-based advertising and provide important implications for the interface-design of location-based advertising applications.