In this series, we discuss how academic and industry research can provide conceptual insights, potential data sources, and analytical techniques to support or rebut expert testimony related to online advertising activities of firms and online purchases of customers.
Over the course of the last two decades, the internet has transformed from a novelty—in 2000, only 1 percent of U.S. adults used broadband internet at home—to a nearly ubiquitous utility.
The increasingly widespread usage and breadth of online activities have far-reaching implications for consumer and retailer behavior. For one, consumers are increasingly buying online. Over the last ten years, online sales have almost tripled, from 4 percent of all retail sales in 2010 to over 11 percent in 2019.
In light of the COVID-19 pandemic, online sales are seeing accelerated growth and quickly becoming a dominant purchase channel across many product segments, including those that may have been previously viewed as unlikely to move online, such as groceries. Traditional, brick-and-mortar retailers have also been impacted by the ubiquity of online access in other ways. Access to the internet through mobile devices allows consumers to more easily research potential purchases. To adapt, many traditional retailers are offering improved omnichannel shopping experiences.
Despite these seismic shifts, market analyses in litigation involving product liability, false advertising, intellectual property, and other areas often ignore or fail to properly account for these developments. For example,
- The process by which consumers research products and services before purchasing has evolved, largely due to the rise of the internet and the resulting increase in the amount and types of information available to consumers (e.g., product labels, product websites, third-party reviews). This complicates any analysis of what information consumers may have been exposed to or relied on when deciding to purchase a product.
- On the other side of the market, producers and retailers are increasingly relying on technology-enabled marketing. Online advertising strategies, such as sponsored search advertising and display advertising, offer opportunities to tailor highly relevant ads to individual consumers. Tailored advertising may make it more likely that consumers were exposed to different marketing messages from a company.
- Social media platforms and websites can serve to diffuse electronic word-of-mouth such as consumer reviews about products, which can influence sales. Companies often seek to influence this electronic word-of-mouth via public relations and other marketing activities, raising the questions of whether and how a company can be held liable for any misleading electronic word-of-mouth.
- Displayed pricing for a product sold online can vary over shorter time periods than in retail stores. These pricing dynamics would complicate any assessment of economic harm that a putative class of consumers allegedly suffered from a disclosure related to that product.
Understanding how this new paradigm affects consumer decision-making processes and firm marketing behavior can be critical. In this series, we will discuss key findings from academic and industry research, and explore how these findings can provide conceptual insights, guidance on potential data sources, and relevant analytical techniques in litigation.
The views expressed herein do not necessarily represent the views of Cornerstone Research.
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