Price Advertising by Manufacturers and Dealers

Abstract

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pickup truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pickup truck sales, price, and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict. This paper was accepted by Pradeep Chintagunta, marketing.

Immediate Responses of Online Brand Search and Price Search to TV Ads

“…This reversal of relative cost effectiveness in generating brand versus price search has an intuitive explanation in that the content of TV ads for these three truck brands typically varies systematically between national and local spots. National spots are purchased exclusively by the manufacturers and, according to a content analysis by Xu et al (2014), typically carry brand-oriented messages with relatively few price-oriented messages. Local TV spots are purchased by both manufacturers and local dealers associations, with both parties designing ads that extensively communicate current market-specific pricing and promotion terms.…”

Web advertisement effectiveness evaluation: Attention and memory

“…Text introduction of a tourism product is a valuable content for both visual selection and recall result. Although price had been considered to reflect service quality and reduce risk in travel choice (Chen and Tsai, 2007; Lepp et al., 2011; Xu et al, 2014), there was no significant difference in attention capture and recall effect detected due to adding price into online tourism advertisements. Although the market competition leads to higher price sensitivity (Narasimhan et al., 1996) and low-price competition has been a vicious phenomenon in domestic tourism marketing, this study suggests that highlighting low price is not particularly effective because there is no significant difference detected on tourism consumers’ attention and memory when there is price added to the online tourism advertisements.…”

“…There is, however, contention between destination brand marketers and travel trade intermediaries about whether to include a price in tourism advertisements. Destination marketers are reluctant to include a price in their advertisements to avoid lowering consumers' brand perception by low prices (Rao and Monroe, 1988), while intermediaries like online travel websites tend to compete on price to increase demands (Xu et al, 2014). Therefore, the inclusion of a price in tourism advertisements is controversial and insufficient attention has been devoted to its effect on consumers' perception and memory in conjunction with images and texts.…”

Advertising in Vertical Relationships: An Equilibrium Model of the Automobile Industry

“…In a similar model of demand using data on truck sales, Xu et al (2013) find that price advertising by dealer associations is more effective than price advertising by manufacturers. Their story is that the more local an ad's sender, the more credible the information in the ad.…”

“…6 Manufacturer and dealer association brand advertising tends to communicate messages about brand, features, and desirability. Xu et al (2013) studies advertising content for trucks, and finds that local market ads by manufacturers and dealer associations have very similar mixes of price and brand content. Dealer association advertising tends to cater more to local populations, for instance featuring local celebrities or sports teams, but still emphasizes the brand.…”