On Comparing Alternative Advertising Policies of Pulsation*

Abstract

In this paper, five alternative advertising policies that belong to the advertising pulsation class are compared analytically for linear and concave response functions using a modified version of the Vidale‐Wolfe model. The results of the research show that (1) For both linear and concave response functions, advertising pulsing/maintenance policy dominates advertising pulsing policy but is dominated by the Uniform Advertising Policy. For convex response functions, the order of dominance is reversed. (2) For linear response functions, uniform advertising policy dominates the impulse advertising policy but is dominated by the chattering advertising policy. (3) For concave response functions, uniform advertising policy dominates both the impulse advertising policy and the chattering advertising policy. (4) For convex response functions, chattering advertising policy dominates both the advertising pulsing policy and the impulse advertising policy. The Vidale‐Wolfe model is estimated using the well‐known Lydia Pinkham data. Optimality analysis shows that the company was overadvertising about half of the time studied. Overadvertising seems to have produced appreciable gain in sales and created significant barriers to competitive entry at a little cost in terms of foregone profits.

Goodwill and dynamic advertising strategies

“…This literature advocates the important role played by the shape of the advertising response function on dynamic advertising strategies (e.g. Mahajan and Muller, 1986;Mesak and Darrat, 1992;Sasieni, 1989;Vakratsas et al, 2004). In a seminal paper, Sasieni (1971) analytically shows for a monopoly case that if marginal returns of sales to advertising are not increasing, then there exists an "optimal" expenditure level that allows a firm to maintain its optimal sales level.…”

Pulsation in a competitive model of advertising-firm's cost interaction

“…Mesak and Darrat's (1992) study as well as the monopolistic version of our model employ a modified version of the Vidale and Wolfe (1957) dynamic advertising response model attributed to Little (1979). Mesak and Darrat (1992), however, do not consider in detail firm's cost in their modeling effort as we do.…”

“…Mesak and Darrat's (1992) study as well as the monopolistic version of our model employ a modified version of the Vidale and Wolfe (1957) dynamic advertising response model attributed to Little (1979). Mesak and Darrat (1992), however, do not consider in detail firm's cost in their modeling effort as we do. While Mesak and Darrat (1992) show that a pulsation policy is superior to its uniform counterpart in the presence of convexity in the advertising response function and linearity in the production cost function, the present study demonstrates the potential superiority of a pulsation policy in the presence of concavity in the advertising response function, convexity in the firm's cost function and over-advertising.…”

“…The closest studies to this research are Mesak and Darrat (1992) for monopolistic markets and Mesak (1999) for oligopolistic markets. Mesak and Darrat's (1992) study as well as the monopolistic version of our model employ a modified version of the Vidale and Wolfe (1957) dynamic advertising response model attributed to Little (1979).…”

“…Modeling framework Planning horizon Performance measure Mechanism motivating pulsation Mahajan and Muller (1986) Continuous Finite Total awareness Convexity in advertising response function Sasieni (1971) Continuous Finite Discounted profit Mesak and Darrat (1992) Continuous Infinite Average sales rate Simon (1982) Discrete Finite Discounted profit Asymmetric response to high and low levels of advertising Mesak (1985) Continuous Infinite Average sales rate Mesak (1992) Continuous Infinite Average sales rate Hahn and Hyun (1991) Discrete Finite Discounted profit Interaction of fixed and pulsing costs Feinberg (1992) Continuous Infinite Average undiscounted profit rate S-shaped advertising response function and exponential-smoothing filter Naik, Mantrala, and Sawyer (1998) Continuous Finite Total awareness Message quality/wearout Bronnenberg (1998) Discrete Finite Average gain in period market share…”