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

Erdem, Tülin; Keane, Michael P.; Sun, Baohong

doi:10.1007/s11129-007-9020-x

Cited by 65 publications

(20 citation statements)

References 49 publications

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“…Overall, such a policy would wipe out the competitive advantage of Coca-Cola and PepsiCo brands and level competition with PLs whose market shares would stay the same or increase. 10 The results are consistent with the findings of Erdem et al (2008), who used data on detergents, in that advertising raises the level of demand rather than decreasing the price elasticity of demand (i.e. it steepens the demand curve).…”

Section: Simulation Resultssupporting

confidence: 75%

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

2015

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The expansion of private labels, or store brands, has transformed consumer choice sets and competition in retail markets, prompting manufacturers to fight back with renewed pricing and product and promotion strategies to forestall further private label expansion. This article examines the spillover effects of television advertising on brand-level consumer demand for carbonated soft drinks (CSDs), including private labels, using a random coefficients logit model with household purchasing and advertising viewing Nielsen data. As in previous work, we find that although brand spillover effects significantly increase demand for CSD brands in the same company and undermine demand facing other manufacturers' CSD brands, surprisingly, there are positive spillover effects on the demand for private label brands. This indicates that brand advertising is persuasive with respect to manufacturers' brands but complementary with respect to private labels. Further results show that eliminating television advertising for CSDs would lower aggregate CSD sales as consumers migrate to other beverages, although private labels stand to gain, particularly Wal-Mart brands.

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Section: Simulation Resultssupporting

confidence: 75%

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

2015

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“…Third, the information is concentrated in experience-and credence-based characteristics, which tend to be advertised, rather than search characteristics that consumers can learn in the store before purchase (Erdem, Keane and Sun 2008). Fourth, product differentiation-both real and spurious-is important because we emphasize the trade-off between persuasion and information, with the optimal mix depending upon a product's characteristics (see Soberman 2002).…”

Section: Data and Content Analysismentioning

confidence: 99%

Information content of advertising: Empirical evidence from the OTC analgesic industry

Anderson

Ciliberto

Liaukonytė

2013

International Journal of Industrial Organization

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We use data from video files of all advertisements in the OTC analgesics industry from 2001 to 2005 to measure the information content in ads. We propose a simple theoretical framework to motivate an ordered probit model of information content. We find that stronger vertical differentiation is positively associated with the delivery of more product information in a brand's advertisements: brands with higher levels of quality include more information cues. Comparative advertisements contain significantly more product information than noncomparative advertisements. Brands with higher market shares and brands competing against generic substitutes with higher market shares have less information content. Our empirical analysis examines the relationship between market variables and the information content of advertising. First, we classify and fully measure different types of advertising content, as well as the distribution of information cues, within an entire industry. KeywordsSecond, we use an ordered probit model of the number of information cues in advertisements as a function of the market share of a brand, its core vertical characteristics, and the share of the generic substitute. To motivate the selection of an ordered probit we develop a simple and intuitive framework in which firms decide how much objective information to include in an advertisement.The underlying idea behind our empirical analysis is that there exists a trade-off between objective information and other persuasion, subject to random factors intrinsic to specific ads. The amount of time spent on information-as approximated by the number of information cues-has systematic and random components.We find that stronger vertical differentiation is positively associated with more information.We also find that comparative advertisements contain significantly more information than noncomparative advertisements, and that larger brands and a higher market share of the generic version of a brand are both associated with less informative ads. Significant estimation bias results from not controlling for the endogeneity of the decision to use comparative advertising and from the endogeneity of market share.Our analysis contributes to the sparse empirical literature on the persuasive vs. informative content of advertising (see Bagwell, 2007, for a comprehensive survey). To our knowledge, the only

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“…Brand strength in turn drives profits (Ambler, ). Furthermore, using scanner data, Erdem, Keane, and Sun () show that advertising reduces consumer price sensitivity by increasing the number of customers willing to pay any given price for a brand. This external launch activity should therefore impact financial launch success.…”

Section: Conceptual Developmentmentioning

confidence: 99%

Externally Directed and Internally Directed Market Launch Management: The Role of Organizational Factors in Influencing New Product Success

Kuester¹,

Homburg²,

Heß³

2012

J of Product Innov Manag

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Introducing new products remains a critical challenge for managers. Consumer acceptance of new products is key to new product success and requires the effective implementation of market launch activities. The present study describes the relationship between different types of market launch activities and market‐related, time‐related, and financial market launch success. The study's framework extends previous work on launch management by complementing the view that launch activities are predominantly outwardly directed with the notion that launch management can also be inwardly directed. More specifically, launch activities can both target customers as the external audience, for example, via communication and pricing, and address an internal audience, such as management and sales personnel, for example, using departmental coordination or employee incentives. The study also sets out to investigate how situational factors impact the relative effectiveness of both externally directed and internally directed launch activities in engendering successful new product launches. In particular, product newness, technology drivers, and firm size are considered as relevant variables. Structural equation analysis of data on 178 new products across industries provide empirical evidence that market launch success depends on the intensity of both externally directed and internally directed market launch activities. With regard to the overall impact of internally directed activities, the findings confirm that organizational factors and antecedents indeed play a critical role in new product launch and its respective performance with internally directed activities having an even stronger impact on time‐related and financial success than outwardly directed instruments. Specifically, these internal activities are often viewed as idiosyncratic resources that are hard for competitors to observe and are therefore more difficult—if not impossible—to replicate compared to externally directed activities in market launch. The paper clearly pinpoints that the successful launch of new products is a complex task that also necessitates the implementation of internally directed launch activities. Fast market penetration requires coordination among the different internal players as well as support from top management. Furthermore, the financial objectives of the market launch can only be met if employees and executives both receive the necessary incentives and support to effectively execute the new product introduction. The study also demonstrates that moderators impact the strength of the effectiveness of these two different types of market launch activities. This research provides important implications for launch management by advocating that the two foci on external and internal constituencies should not be pursued in isolation but that instead, the opposite is true.

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

Abstract: Advertising, Consumer price sensitivity, Brand choice, M37, M31, D12,

Cited by 65 publications

References 49 publications

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

Information content of advertising: Empirical evidence from the OTC analgesic industry

Externally Directed and Internally Directed Market Launch Management: The Role of Organizational Factors in Influencing New Product Success

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