NEW UPDATE: Completed trials may now upload and register supplementary documents (e.g. null results reports, populated pre-analysis plans, or post-trial results reports) in the Post Trial section under Reports, Papers, & Other Materials.
Marketing Effects in a Consumer Credit Market in South Africa
Initial registration date
July 26, 2016
July 26, 2016 2:46 PM EDT
Other Primary Investigator(s)
University of Chicago
Additional Trial Information
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. Registration Citation
Intervention Start Date
Intervention End Date
Primary Outcomes (end points)
Did not obtain a loan
Applied for loan before mailer deadline
Obtained loan before mailer deadline
Loan amount obtained before mailer deadline
Loan in collection status
Borrowed from other lender
Primary Outcomes (explanation)
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
The study was conducted in partnership with a highly profitable consumer lender in South Africa to determine the effects of advertising content, price, and offer deadlines on loan take up, and in doing so, to analyze the effects of advertising content on real decisions, involving non-negligible sums, among experienced decision makers.
The lender sent direct mail solicitations to 53,194 predominantly urban former clients offering them a new loan at randomly assigned interest rates ranging from 3.25 percent per month to 11.75 percent per month. These mailers varied in a number of ways. First, there were eight variations in advertising content- (1) a person' s photograph on the letter, (2) a suggestion of how to use the loan, (3) a table featuring either a small or large number of example loans, (4) information about interest rate and payments, (5) a comparison to competitors' rates, (6) mention of a promotional raffle, (7) a reference to the "special" or "low" rate, and (8) a mention of the lender offering services in the local language. Additional randomization included the time before the offer' s deadline, which varied from two to six weeks.
Experimental Design Details
A consumer lender in South Africa sent advertising fliers to former clients, chosen at random from among those who had borrowed from the Lender within 24 months of the mailing date, but not within the previous six months
Was the treatment clustered?
Sample size: planned number of clusters
Sample size: planned number of observations
Sample size (or number of clusters) by treatment arms
see data & paper, multi-arm design
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
INSTITUTIONAL REVIEW BOARDS (IRBs)
Post Trial Information
Is the intervention completed?
Intervention Completion Date
December 31, 2006, 12:00 AM +00:00
Is data collection complete?
Data Collection Completion Date
December 31, 2006, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
Final Sample Size (or Number of Clusters) by Treatment Arms
Reports, Papers & Other Materials
Policymakers often prescribe that microfinance institutions increase interest
rates to eliminate their reliance on subsidies. This strategy makes sense
if the poor are rate insensitive: then microlenders increase profitability (or
achieve sustainability) without reducing the poor’s access to credit. We test the
assumption of price inelastic demand using randomized trials conducted by a
consumer lender in South Africa. The demand curves are downward sloping,
and steeper for price increases relative to the lender’s standard rates. We also
find that loan size is far more responsive to changes in loan maturity than to
changes in interest rates, which is consistent with binding liquidity constraints.
Karlan, Dean, and Jonathan Zinman. 2008. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance." American Economic Review 93(8):1040-68.
REPORTS & OTHER MATERIALS