Pricing and persuasive advertising in a differentiated market

This paper examines the effects of consumer preferences, firms’ costs, and advertising efficiencies on firms’ pricing and persuasive advertising strategies. We show that as the firms’ horizontal differentiation increases, the firm with a lower value-added product tends to increase persuasive advertising, whereas its competitor tends to reduce advertising. Second, the firm receiving a favorable shock in product valuation will complement the favorable change with additional persuasive advertising rather than reduce advertising spending. Third, an equal improvement in advertising efficiency in the industry will lower the profits for both firms, whereas a decrease in advertising efficiency in the industry can benefit both firms. Fourth, a larger shock that improves a firm’s product valuation or unit cost is more likely to induce higher advertising spending in the industry. Lastly, an exogenous increase in the separation between firms’ product valuations or perceived qualities may actually reduce the price dispersion in the industry.     

The capital market spillover effect of product market advertising: Evidence from stock price synchronicity

We analyze whether product market advertising has a spillover effect on stock price synchronicity by transmitting firm-specific information to the capital market and attracting more investor attention. Using a sample of Chinese listed firms from 2009 to 2017, we find that firms with greater advertising expenditures have lower stock price synchronicity. The results are robust after we address endogeneity concerns. In accord with our hypothesis that product market advertising increases the amount of firm-level information capitalized into stock prices through the information channel, we find that the impact of advertising on synchronicity is more pronounced for firms with a higher degree of information asymmetry and firms in the consumer-product industry. Further tests show that product market advertising enhances the ability of current period returns to reflect future earnings, and thus rules out that the negative relationship between advertising and synchronicity is driven by noise trading. Our results imply that product market advertising plays an informative role and improves information efficiency in a capital market.     

Addressing negative product attribute reviews: The case of advertising product attributes and corporate social responsibility information

Negative product reviews are bad for businesses. They can adversely affect product sales, brand evaluations, and brand loyalty. To attend to negative reviews, one approach is through advertising products or company virtues. The current study examines the efficacy of different advertising approaches (core product attribute advertising vs. non-core product attribute advertising vs. corporate social responsibility [CSR] advertising) in helping dilute the negative effect of dissimilar negative product attribute reviews (negative core product attribute reviews vs. negative non-core product attribute reviews). Through four experiments, we found that when the non-core attribute of a product had negative reviews, a core attribute advertising approach weakened the effect of negative reviews. However, CSR advertising was less effective. Furthermore, when the core attributes of a product had negative reviews, a non-core attribute advertising effort did not weaken, but actually augmented the impact of negative reviews. In addition, when the core attributes of a product received negative reviews, CSR advertising decreased the influence of negative reviews. Our findings provide theoretical and managerial implications for managing negative online reviews of product attributes.     

The Parity Product—Advertising's Achilles Heel

Relatively little has been written about parity product advertising in spite of the fact that a growing amount of advertising is for products that are not significantly different from competitors'. The lifeblood of successful national advertising is product differentiation; yet parity products are not all that different. Hence advertising creators use a variety of techniques to differentiate the similar. These communications are not the kinds of straightforward, informative, impeccably honest messages increasingly demanded of the advertising community. They are more akin to poetry than to product information. The parity product, then, makes advertising vulnerable to criticism from those who want it to be what it apparently cannot be.     

Does advertising indicate product quality? Evidence from prelaunch and postlaunch advertising in the movie industry

Literature on the informative role of advertising indicates that advertising quantity can serve as an indicator of product quality. As product life cycles grow shorter, firms in many industries spend significant amounts on advertising during the prelaunch period to create large initial demand. Thus, the role of prelaunch advertising may differ from that of postlaunch advertising, and a proper understanding of these differences is important. This study provides an empirical investigation of whether advertising is a reliable indicator of quality before and after product launches, using the data from the movie industry. Analyses of 1078 movies released during 2003–2011 show that postlaunch advertising is a reliable quality indicator and increases revenues, whereas prelaunch advertising is not a reliable quality indicator, even if it leads to higher revenues.     

Is television advertising being placed to reach product users?

Several textbooks, journal articles, and advertising practitioners indicate that the advertising for many products should be directed toward the heavy users of the product category. Other works suggest that advertising should be directed at current users of a brand to retain them or to users of competitive brands in an effort to attract them. The purpose of this article is to compare these directions for how advertising should be placed with data showing how advertising is being placed. The comparison is made using supermarket scanner panel data and household advertising exposure data. Examples are also provided to indicate the extent to which advertising could be targeted to heavy users of the product category and users of a brand, given the actual viewing and consumption patterns. Several implications for the placement of advertising are discussed.     

Bundling products to success: The influence of complementarity and advertising

This study investigates the strategic influence of product complementarity and advertising on the success of bundling products. We use a profit maximization model to show that when a firm sells bundled products, both the product complementarity and advertising significantly impact the performance of bundled products. The bundling strategy with advertising can help firm achieve higher performance than the bundling strategy without advertising. However, the price discount to the identical products must be attractive to customers and the degree of product complementarity to the complementary products must be large enough, and then the bundling strategy with advertising can obtain a success in the market. Furthermore, our results also show that when the degree of the complementarity between two products increases, firm should invest less on advertising to promote the bundled products. Based on our results, we propose optimal marketing strategies for firms to adopt. Firm managers can utilize our findings to plan their bundling strategies wisely.     

Clarifying the Relationship between Involvement Variables and Advertising Effectiveness among Young People

Previous research has indicated the need for an in-depth investigation of the role of involvement variables in advertising information processing among young people, in view of the unsuitability of existing adult persuasion models for a young population, the inadequate consideration of involvement variables among young people and the unique characteristics of this population. This study examined the effects of advertising involvement and product involvement on advertising effectiveness among young people, using a quantitative study of 252 4–15-year olds. Results show that advertising involvement and product involvement had a positive direct effect on ad effectiveness. In addition, all endogenous variables—subjective product knowledge, peer and parent influence and age—had an indirect effect on ad effectiveness, via advertising involvement and product involvement. Interestingly, subjective product knowledge and peer influence had no direct effect on ad effectiveness, but rather only an indirect effect. This study presents a more accurate depiction of the complexity of the process and shows that advertising involvement and product involvement contribute to a better understanding of the process among young people.     

The effectiveness of post-release movie advertising

Frequent new product introductions and short product life cycles lead to unusually high levels of advertising in the movie industry. We study the effectiveness of television advertisements aired after the theatrical opening of a motion picture (‘post-release advertising’). We estimate an instrumental variables, lagged effects model using a novel dataset constructed to obviate simultaneity concerns and temporal aggregation biases. We find that post-release movie advertising exhibits a high degree of heterogeneity across films, but generates substantial returns for some movies. Our findings suggest that studios may find it beneficial to experiment with higher post-release advertising budgets. Further, exhibitors may benefit from extended movie life cycles if they share post-release advertising responsibility with studios.     

On the Origin and Distinctness of Skepticism toward Advertising

Two studies were conducted to investigate the origin and distinctness of consumer skepticism toward advertising, defined as a tendency to disbelieve advertising claims by Obermiller and Spangenberg (1998). The first study examined the role of socialization in the family by comparing levels of ad skepticism across generations. Significant associations were strongest for female children with their fathers; less strong but apparent for male children with their mothers. Further, the associations diminished with age, which was considered a surrogate for time away from home. The second study explored the relationship between skepticism toward advertising and skepticism toward other sources of product information. The results indicated some overlap between skeptical beliefs about advertising and salespeople, but, otherwise, ad skepticism appeared to be a separate construct from skepticism toward other sources of product information. Moreover, advertising was viewed as the least believable of the five sources of product information that were considered.     

International Advertising Expenditure Trends

This study identifies social uses of advertising by young male adults who have been brought up in a mass media-driven society, which makes them more advertising literate. A diary study revealed the frequent use of TV advertising slogans and taglines that did not directly relate to any product purchase or use occasion. Moreover, the meanings consumed by the group were independent of the product that the ads promoted. The topic of social uses of advertising by groups has far-reaching practitioner implications for advertising research and copy development, which are discussed.     

How do 3-dimensional images promote products on the Internet?

The study investigates 3D virtual advertising as it affects the online shopping environment. It examines the vividness of mental imagery as a mediator, and consumers' need for touch and product type as moderators of the effects. An experiment conducted with 207 study participants and two product types, a watch and a jacket, indicates overall that 3D advertising outperforms 2D advertising in effectiveness. The vividness of mental imagery appears to directly influence attitudes and intentions by mediating the effects of 2D versus 3D. As expected, the 3D and 2D formats consistently differed more in their effects for geometric products than for material products. Consumers' NFT affected only intentions to revisit, interacting with product type and site type. For the watch product, 3D advertising is more persuasive for both high and low NFT consumers. Comparatively, for the jacket product, 3D strongly impacts low-NFT consumers only, but has no significant difference for high-NFT study participants.     

Are services advertised differently? An analysis of the relationship between product and service types and the informational content of their advertisements

This study examines the informational content of service and product advertisements and analyses the relationship between the amount and type of information in an advertisement and the type of product or service being advertised. The influence that service characteristics have on advertising strategy is still not well understood. One theory is that services need to be more tangible in order to assist in the consumer decision-making process and advertising can assist with this by providing factual information. The purpose of this paper is to establish whether this theory is recognized and adopted in advertising practice. This is achieved by performing a content analysis. The results indicate that product advertisements contain more information than services, which indicates a discrepancy between advertising theory and practice. The results also prove that there are variances in the amount and type of information included in product and service advertisements. The paper examines these variances and applies existing classification frameworks to explain them. Areas for further research are also identified.     

How does the added new online channel impact the supporting advertising expenditure?

This research addresses the strategic effect of a newly added online channel on a manufacturer’s supportive advertising expenditure once a manufacturer opts to open an online channel to compete with its retailer. We first study the manufacturer–traditional retailer supply chain and consider three different scenarios: (1) product is less compatible with the online channel than with the traditional channel; (2) product is more compatible with the online channel than with the traditional channel; (3) product has the same compatibility with the online channel as with the traditional channel. Our results show that the added online channel significantly impacts the manufacturer’s investment in supportive advertising. Depending on the different product categories, the impact of the newly added online channel on the supportive advertising expenditure also will be different. Furthermore, we extend our model to study the manufacturer–online retailer supply chain and investigate the effect of that added online channel on the manufacturer’s supportive advertising to the online retailer. Based on our results, the manufacturer can utilize our findings to improve its decision-making when it plans to open an online channel to improve its product distribution.     

The Influence of Product/Nudity Congruence on Advertising Effectiveness

Abstract

While a body of research has examined the effects of nudity appeals in advertising, previous studies examining the question of product/nudity congruency have failed to consider product categories of equivalent levels of involvement and towards which respondents had similar purchase intention. In this experimental study, we examine the role which product/nudity congruency and levels of nudity have on several measures of advertising effectiveness. We also examine the effect of the usa between these two variables. Our findings suggest that product type and the interaction between degree of nudity and product both influence significantly certain measures of advertising effectiveness. Implications for marketing professionals and researchers are outlined, along with directions for future research.     

An empirical analysis of national and local advertising effect on price elasticity

This paper investigates the interaction effect of advertising and price on the market share of a consumer nondurable product. We postulate a model in which local advertising is thought to primarily affect the consumers' purchase by making the demand more price sensitive, and national advertising to affect the consumers' preference, thus making the demand less price sensitive. Moreover, we hypothesize that local advertising interaction will have more immediate effect, while national advertising interaction will have longer term interaction effects. We apply these ideas empirically, and find support for our hypotheses. Thus, the interaction effect of advertising and price can be characterized by both increased and decreased price sensitivity, depending on the type of advertising. Moreover, these effects may be present simultaneously for the same product.     

Examining Polish Market Mavens and Their Attitudes Toward Advertising

Abstract

In this paper, we offer some insights about Polish consumers with varying levels of general marketplace expertise, their role in diffusing product information, and their views of advertising. Market mavens are consumers who exhibit heightened interestin and knowledge about the marketplace. Because of their interest in communicating with others about the many aspects of the marketplace, these consumers can play an integral role for companies interested in diffusing marketing information. Our study results indicate that market mavens do indeed exist in Poland and they exhibit similar characteristics to market mavens identified in the U.S. They have more favorable attitudes toward advertising than other consumers. Additionally, they consider advertising as an important source of product and social image information. Although Polish mavens are less critical of advertising being misleading and confusing, they are concerned about advertising promoting materialistic values. Our findings imply that firms doing business in Poland would be well advised to target market mavens because they pay attention to advertising, have favorable attitudes toward advertising, and like to talk about marketplace phenomena with others.     

Consumer deliberation and quality signaling

Consumers are often uncertain about their product valuation before purchase. They may bear the uncertainty and purchase the product without deliberation. Alternatively, consumers can incur a deliberation cost to find out their true valuation and then make their purchase decision. This paper proposes that consumer deliberation about product valuation can be an endogenous mechanism to enable credible quality signaling. We demonstrate this point in a simple setup in which product quality influences the probability that the product has high valuation. We show that with endogenous deliberation there may exist a unique separating equilibrium in which the high-quality firm induces consumer deliberation by setting a high price whereas the low-quality firm prevents deliberation by charging a low price. Compared to the case of complete information, the price of the high-quality firm can be distorted upward to facilitate consumer deliberation, or distorted downward to avoid the low-quality firm’s imitation. In an extension we show that dissipative advertising can facilitate quality signaling. The high-quality firm can utilize advertising spending to avert imitation from the low-quality firm without distorting price downward, earning a higher profit than that without advertising. However, advertising mitigates the distortion at the expense of consumer surplus and social welfare.     

Young adults’ responses to product placement in movies and television shows

This research examines young adults’ attitudes towards product placement in films and television shows from two countries that represent contrasting cultural distinctions: the US and Korea. The results suggest that young adults in both countries perceive film product placement in a similar way but, with respect to television, Korean respondents tend to perceive it as less effective in enhancing content realism and more unethical and misleading. In addition, the findings suggest that, for both film and TV, materialism, attitude towards advertising, and realism enhancement appeared to be significant predictors of consumer cognitive response to product placement. However, cross-cultural differences were observed for TV product placement. In the US, materialism and realism enhancement were found to be most powerful predictors of cognitive response to product placement. In contrast, attitude towards advertising and materialism were found to be the strongest predictors in Korea. Implications for both advertising researchers and practitioners are provided.     

隐性与显性的优势互补——内容营销与传统广告的全方位解析

内容营销作为一种隐性的广告形式，已经成为显性传统广告的有利补充，但二者又有着本质的差别。内容营销所要传达的广告信息往往是隐藏在娱乐内容之中，在潜移默化之中引起消费者对品牌的共鸣，这是内容营销与传统广告的最大不同。同时，由于二者表现形式的不同，导致广告主的传播策略、广告创意空间及广告效果测评等方面也存在很大差别。本文通过对内容营销与传统广告的全方位解析，探求二者如何实现优势互补。