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20.05.2024

Investigating complementarities in subscription software usage using advertising experiments

verfasst von: Jon Zeller, Sridhar Narayanan

Erschienen in: Quantitative Marketing and Economics

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Abstract

In this study, we examine complementarities in usage across a set of related software products from a multi-product firm. We employ a novel experimental approach to causally estimate complementarities, leveraging rich usage data and advertising experiments that directly affect the usage of only one product at a time to measure complementarities based on consumption rather than purchase. Our approach is particularly useful as digital contexts are characterized by the simultaneous presence of both substitutability and complementarity between products. They also have scant price variation, bundled pricing plans, and infrequent purchase or subscription renewal decisions, often making typical cross-price elasticity measures for complementarities infeasible. We apply our approach to data from a software company with a suite of related products and find evidence for varying degrees of complementarity across both user groups and products. We show that accounting for complementarities significantly affects the measurement of ad effectiveness and may impact ad targeting decisions by the firm. We explore heterogeneity in complementarities, finding that they are larger for users who have used the products heavily in the past, but small or zero for those who have not. Ours is one of the first studies to causally examine complementarity in usage in the context of subscription products, and our identification strategy can be applied to a variety of contexts.

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Fußnoten
1
Across all pairs of campaigns, the median percentage overlap of users is 0.3%. 78% of campaign pairs have fewer than 5% user overlap.
 
2
If the overall time investment was affected, this would represent a violation of the exclusion restriction. We examine alternative accounts in Section 6
 
3
These additional results are available from the authors upon request
 
4
Exceptions include (Hong et al., 2016; Lee et al., 2013) in the grocery context and (Liu et al., 2018) in the context of durable goods.
 
5
We test for differences across campaigns by running a pooled 2SLS regression with 1,000 users sampled from each campaign and an interaction between usage (instrumented by email campaigns) and an indicator for each campaign in the second stage. We use an F-test to evaluate the restriction that all campaign-specific coefficients are zero and reject the null hypothesis for all eight combinations of independent and dependent usage variables. This implies complementarity varies across campaign populations. The full regression results are in the supplementary analysis (separate from the appendix) in Tables 1 and 2.
 
6
We report the coefficients and standard errors of the cross-product ad effects in Table 10 in the appendix. Of the 108 regressions, 48 are significant. In these results, 43 of the 48 cross-product elasticity regressions that are significant are in the same direction and have a smaller magnitude than the own-product elasticity for the same campaign. The remaining five have larger magnitudes and the same sign; three have a difference within 10%, while two are significantly larger (28% and 212% increases). Across these significant results, the average difference between the non-targeted and targeted application is -53%, while the median is -66%.
 
7
Because we are interested in cross-sectional effects across users of different activity levels, and these activity levels are collinear with the individual fixed effects, we remove individual fixed effects for these specifications.
 
8
The full set of analyses is available from authors upon request.
 
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Metadaten
Titel
Investigating complementarities in subscription software usage using advertising experiments
verfasst von
Jon Zeller
Sridhar Narayanan
Publikationsdatum
20.05.2024
Verlag
Springer US
Erschienen in
Quantitative Marketing and Economics
Print ISSN: 1570-7156
Elektronische ISSN: 1573-711X
DOI
https://doi.org/10.1007/s11129-024-09282-3