Temporal Differences in the Role of Marketing Communication in New Product Categories

Abstract

marketing communication. The first effect refers to marketing communication that enables consumers to update their prior beliefs and reduce uncertainty about the true quality of the new product through a Bayesian learning process. Because marketing communication affects consumer utility indirectly through perceived product quality, we refer to it as the "indirect Bayesian learning effect," or simply "indirect effect." The second effect consists of all effects that are not indirect (e.g., reminder effects) that influence preferences through goodwill accumulation. Because this effect is manifest in a direct shift in consumer utility, we refer to it as the "direct goodwill effect," or "direct effect."Our empirical analysis uses data from a category of ethical drugs. In the pharmaceutical industry, direct marketing communication with physicians is usually referred to as detailing. Detailing comprises promotional visits made to physicians by pharmaceutical representatives. 1 The main sources of information considered by physicians to inform their current diagnoses and prescription decisions are detailing, meetings and conferences, and feedback from previous prescriptions. Additional sources of information include word of mouth and journal advertising. Our main focus is the effect of detailing on the evolution of physician prefer-

The effects of detailing on prescribing decisions under quality uncertainty

“…As a result, detailing may only help physicians to obtain the current information about drugs. This is different from the conventional view of informative detailing under which manufacturers know the true quality of their product from the beginning of the product lifecycle, and use detailing to convey noisy signals about the true quality of their drugs to physicians (e.g., Narayanan et al 2005). Under the conventional framework, the effectiveness of informative detailing will depend mainly on the true quality of the drugs and how much information physicians have learned.…”

“…Another set of studies takes a structural modeling approach to study how uncertainty about drug qualities affects demand (e.g., Ching 2000;2008a;2008b, Narayanan et al 2005, Mukherji 2002). In particular, Narayanan et al (2005) and Mukherji (2002) use the framework of Erdem and Keane (1996) to investigate the effects of detailing on demand, in which they assume manufacturers use detailing to convey noisy signals about the true quality of their products to physicians. These studies provide a useful framework for quantifying the impact of aggregate learning on demand and how detailing affects the rate of learning when manufacturers have complete information about the quality of their drugs from the beginning of the product lifecycle.…”

“…15 We do not compare our detailing elasticity with those implied by Narayanan et al (2005) andMukherji (2002) because they use detailing expenditures instead of detailing minutes, which is used in our paper.…”

Impact of Treatment Effectiveness and Side-Effects on Prescription Decisions: The Role of Patient Heterogeneity and Learning

“…Using a dataset of anti-ulcer drug prescriptions, Crawford and Shum (2005) estimated a dynamic demand model under uncertainty in which patients learn from usage experience about the effectiveness of alternative drugs. In Narayanan et al (2005) and Narayanan and Manchanda (2006), the authors focus on physicians' learning about the quality of new drugs through the marketing communication as well as past prescription experience. Unlike these previous studies which assume an overall "attribute" or "quality" of drug, our study examine the separate impact of effectiveness and side effects on physician's choice of treatment.…”

“…Similar to Narayanan et al (2005) and Narayanan and Manchanda (2006) we allow detailing to have an informative and persuasive role. However in our model we allow for the be useful to supplement its further evaluation.…”