The Effect of Advertising on Consumer Price Sensitivity

Raj, S. Shanmuga Sundara; Winer,; Zufryden,

doi:10.2307/3151358

Cited by 42 publications

(7 citation statements)

References 11 publications

(14 reference statements)

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“…Again, we have to estimate a household level demand system to understand how advertising shifts the demand curve. Krishnamurthi and Raj (1985) and Staelin and Winer (1976) look at "split cable" TV experiments. In these designs, half the households received higher levels of ad exposure for one brand of a frequently purchased consumer good during the second half of the sample period.…”

Section: Background and Literature Reviewmentioning

confidence: 98%

The impact of advertising on consumer price sensitivity in experience goods markets

2007

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Section: Background and Literature Reviewmentioning

confidence: 98%

The impact of advertising on consumer price sensitivity in experience goods markets

2007

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“…Some experimental (Moriarty 1983, Bemmaor andMouchoux 1991) and econometric studies (Bolton 1989 andPopkowski-Leszczyc andRao 1989) indicate that advertising tends to increase price sensitivity. However, there are some (Staelin and Winer 1976, Ghosh et al 1983, Krishnamurthi and Raj 1985, Boulding et al 1994) that indicate the contrary. Kaul and Wittink (1995) suggest that the conflicting evidence depends on the type of the advertisement: price or nonprice.…”

Section: Advertising Competition Under Consumer Inertiamentioning

confidence: 99%

Advertising Competition Under Consumer Inertia

Banerjee

Bandyopadhyay

2003

Marketing Science

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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.

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“…2 Krishnamurthi and Raj (1985) estimate how the intensity of advertising exposure affects the price sensitivity of self-reported demand of an unnamed consumer product, using a split-cable TV experiment.…”

mentioning

confidence: 99%

What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment^*

Bertrand

Karlan

Mullainathan

et al. 2010

Quarterly Journal of Economics

514

318

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ABSTRACT Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized creative content and loan price simultaneously. We find that content has significant effects on demand. There is also some evidence that the magnitude of content sensitivity is large relative to price sensitivity. However, it was difficult to predict which particular types of content would significantly impact demand. This fits with a central premise of psychology-context mattersand highlights the importance of testing the robustness of laboratory findings in the field. Terms of use: Documents inJEL codes: D01, M31, M37, C93, D12, D14, D21, D81, D91, O12

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The Effect of Advertising on Consumer Price Sensitivity

Cited by 42 publications

References 11 publications

The impact of advertising on consumer price sensitivity in experience goods markets

The impact of advertising on consumer price sensitivity in experience goods markets

Advertising Competition Under Consumer Inertia

What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment^*

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The Effect of Advertising on Consumer Price Sensitivity

Cited by 42 publications

References 11 publications

The impact of advertising on consumer price sensitivity in experience goods markets

The impact of advertising on consumer price sensitivity in experience goods markets

Advertising Competition Under Consumer Inertia

What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment*

Contact Info

Product

Resources

About

What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment^*