We construct a multistage game-theoretic model of advertising and price competition in a differentiated products duopoly, in which proportions of consumers exhibit latent inertia in favor of repeat purchase. Advertising simultaneously plays the dual role in reducing such inertia through awareness and enhancing perceived brand value (persuasion). We derive the advertising price cross-effects and provide a theoretical reconciliation of the longstanding debate in the marketing literature regarding the impact of advertising on price sensitivity. We characterize the nature of equilibria under symmetry and show that when a large proportion of consumers exhibit inertial tendencies, then a multiplicity of equilibria exists. Marketing implications and comparative statics are discussed.Numerical simulations for asymmetric firms are presented, wherein we show that advertising is not a useful competitive tool for small firms. However, advertising spending by the large firm provides a halo effect for the average prices in the category, which has a positive externality on the small firm's profits. In the absence of the small brand advertising, larger brand shares encourage firms to allocate higher expenditures on advertising to enhance the perceived value of their brand, which in turn shore up the average prices in the industry from which all firms benefit.
PurposeExisting literature offers conflicting evidence on how prior product knowledge influences amount of information search. A majority of these studies are based on variants of cost benefit frameworks where consumers engage in search until the benefits from information search exceed search costs. The purpose of this paper is to develop an expectancy theory‐based framework to model consumers' information search and its antecedents, including motivation to search as an intervening construct.Design/methodology/approachThe framework is tested using data from real consumers engaged in their actual purchase decisions, in an emerging market context, using longitudinal survey research design. The data are analysed using structural equation modeling to test the hypothesized model. The model shows an acceptable fit with X2 (271, 487)=640.252, p < 0.00 and 0.95 CFI.FindingsResults indicate that the relationship between prior product knowledge to information search is mediated by motivation to search. Prior product knowledge influences motivation to search through its influence on the consumer's perceived ability to search and his/her perceived value of additional information. Furthermore, perceived ability to search is the strongest predictor of motivation to search. The parsimony of the proposed framework in providing a simpler account of factors influencing the search process along with its managerial implications is discussed.Practical implicationsThe findings suggest that perceived ability to search and perceived value of additional information are two important levers that managers could use for achieving desired results. Furthermore, perceived ability to search is an important mediator, which completely mediates the relationship between prior product knowledge and motivation to search. These findings also provide strong indications about the need to simplify the search process for consumers, especially in the context when novelty is predominantly marketed.Originality/valueThe paper introduces a motivational measure of search in the literature and shows that the motivational measure is indeed the proximal measure to other antecedent constructs compared to a behavioral measure of search. Perceived ability to search and perceived value of additional information are shown as important mediators between prior product knowledge and motivation to search.
The increasing availability of customers' transaction level data at the point of sale (POS) in electronic form in various stores in India is opening up important arenas in marketing analytics that can enhance business dicision-making process. This paper discusses the strategic role that management of customer information resources can play for the growth and sustenance of business. This paper also provides examples of simple analysis using POS data that can directly aid practising managers in their strategic and tactical decision-making.
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