Building Brand Awareness in Dynamic Oligopoly Markets

Abstract

Companies spend hundreds of millions of dollars annually on advertising to build and maintain awareness for their brands in competitive markets. However, awareness formation models in the marketing literature ignore the role of competition. Consequently, we lack both the empirical knowledge and normative understanding of building brand awareness in dynamic oligopoly markets. To address this gap, we propose an N-brand awareness formation model, design an extended Kalman filter to estimate the proposed model using market data for five car brands over time, and derive the optimal closed-loop Nash equilibrium strategies for every brand. The empirical results furnish strong support for the proposed model in terms of both goodness-of-fit in the estimation sample and cross-validation in the out-of-sample data. In addition, the estimation method offers managers a systematic way to estimate ad effectiveness and forecast awareness levels for their particular brands as well as competitors' brands. Finally, the normative analysis reveals an inverse allocation principle that suggests--contrary to the proportional-to-sales or competitive parity heuristics--that large (small) brands should invest in advertising proportionally less (more) than small (large) brands.marketing, competitive strategy, advertising and media, nonlinear Kalman filter, dynamic games

Robust Dynamic Estimation

“…For example, see Naik et al (1998) for the Kalman filter estimation without White's correction, and Naik et al (2008) for robust inferences via the sandwich estimator. Panel A in Figure 1 presents the Kalman filter estimation without White's correction; Panel B in Figure 1 augments it with White's correction for robust inferences.…”

O patrocínio do futebol como ferramenta do marketing esportivo para a construção de brand awareness 10.5752/P.1984-6606.2010v10n23p80

“…Os ativos reais das empresas são os intangíveis, como a marca, muito mais do que plantas fabris ou maquinários. Para manter estes ativos intangíveis, os executivos investem centenas de milhões de dólares em ações de comunicação para a construção do brand awareness (NAIK et al, 2008). O brand awareness pode influenciar a decisão de compra dos consumidores por afetar as associações da marca que formam sua imagem (KELLER, 2003).…”

“…A lembrança da marca, por meio do patrocínio, pode permitir seu crescimento e ressaltar a importância de ações desta natureza no contexto do marketing esportivo. Brand awareness é essencial no processo de decisão de compra como também é importante que o consumidor relembre da marca em determinada categoria específica de produtos (MOISESCU, 2009;NAIK, 2008;MACDONALD e SHARP, 2003). A lembrança aumenta a probabilidade de que a marca seja um dos membros durante a consideração para a compra (MOISESCU, 2009;KELLER, 2003).…”

“…Campanhas publicitárias podem aumentar esta visibilidade, sem necessidade de investimentos impraticáveis para a realidade do clube. As marcas menores precisam investir em propaganda proporcionalmente menos que as grandes marcas (NAIK et al, 2008), para o crescimento do brand awareness.…”

Competitive Targeted Advertising Over Networks

“…Change in the level of brand awareness is driven by the amount of advertising efforts directed to the unaware segment, word-of-mouth communication, and "forgetting" effects. Recently, Naik et al (2008) extended this model by incorporating competition among brands. Unlike these models which assume a continuum of agents, we consider a society envisaged as a social network of n agents and study the effectiveness of targeted marketing campaigns in the presence of competition that explicitly takes into account the underlying network structure.…”