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Faculty Insights

Communicating Identity with Digital Labels

More businesses are adding social identity labels to their online platforms. But does it affect retailer demand?

By Clare Becker

October 19, 2023

Blurred image of restaurant and server carrying plates
Image by lifeforstock on Freepik

Cultural and societal changes over the past few years have contributed to a greater willingness to publicly integrate business and business owners’ identities.

Google Places, Facebook, Amazon, Yelp, and similar websites and apps now provide visible support for equity, diversity, and inclusion by giving business owners the option of self-identifying by gender, race, etc., by adding digital labels to their online store listing—their “digital storefronts.” These labels are searchable, and visible on maps and lists, allowing for easier patronage by those seeking to support a business with a particular identity.

A recent two-part, multimethod analysis by Yash Babar of the Wisconsin School of Business explores whether such social identity signals impact consumer decision-making and retailer demand. The first study, using Google Places business profiles for Black-owned Chicago restaurants, experimentally manipulated Black and women-owned labels and examined patrons’ expectations (such as a desire to visit the restaurant) as well as their perceptions of restaurant quality. The findings suggested that the Black-owned digital label led to increased levels of patron expectation and perceptions of restaurant quality. Both labels had a positive impact on consumer decision-making and demand, driven principally by Black and politically liberal customers. In a follow-up experiment using Yelp business pages, consumers had a 6% additional willingness to pay for a business explicitly labeled as Black-owned vs. not.

For the second study, Babar, an assistant professor of operations and information management, looked at Black- and women-owned labels from Yelp and Google Places in relation to foot traffic and customer visits with a sample drawn from restaurants across three U.S. metropolitan areas. The findings suggested a marked increase again in the number of visits in relation to the digital labels, predominantly for regions that historically voted Democrat.

“In times where nearly all online services help a business express identity, online businesses need to be aware that by signaling gender or race of ownership, they might be expressing more than they think they are.”

—Yash Babar

A robust body of literature in fields such as marketing, economics, and hospitality gives credence to the notion that a distinguishable retailer identity can impact consumer demand, says Babar, but little to no research exists on digital identity signals and retailer performance.

“We wanted to know not only whether social identity signals can impact consumer decision-making, but what should business owners know in terms of what kind of consumers get impacted and why?” Babar says. “We found that the Black-owned label, in particular, is a major driver pretty much across the board, and that the effects generally tended to align or resonate with liberal customers, women, and Black customers in general.”

Study one’s data was taken from a controlled experiment where a final pool of 1,030 participants was selected from, an online research platform, over the span of a two-week period in October and November 2022. The pool was balanced in terms of gender and race (white and Black). Each respondent was shown 16 hypothetical business profiles selected at random and taken from a larger group of 80 Chicago-based bars, coffee shops, and eating establishments. Every profile shown was designed to include either a Black-owned or a woman-owned digital label—creating the possibility of a respondent seeing one, both, or neither of the labels when shown a business profile.

Study two incorporated archival data on actual retailers’ label adoption from Google and Yelp, and then examined it against geospatial, third-party data from the data provider, SafeGraph. The analysis included three large U.S. cities—Boston, Chicago, and Memphis—and allowed for estimates of visitors to business establishments by examining foot traffic data, number of unique visits, length of visit, etc., for the period of January 2018 through April 2022. The final sample included 2,965 Chicago businesses; 1,746 Boston businesses; and 1,564 businesses in Memphis. This study reinforced through historical real-world data what the authors found to be true in the digital experiments.

“Perhaps what’s most interesting in this work is that not only were people more likely to visit businesses they identified with more, but they also perceived dimensions of quality like food, service, and atmosphere of the same places differently based on signaled identity,” notes Yash. “In times where nearly all online services help a business express identity, online businesses need to be aware that by signaling gender or race of ownership, they might be expressing more than they think they are.”

Future avenues of research might include the use of social identity labels in online advertising and different non-food/drink-based domains, including targeting ads by consumer demographic and political affiliation. Exploring consumer spending data in relation to establishment visits as well as the adoption of additional labels such as LGBTQ+ allyship could yield valuable insight and extend the work on the impact of social identity labels and retailer demand.