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

In this paper we use Nielsen scanner panel data on four categories of consumer goods to examine how TV advertising and other marketing activities affect the demand curve facing a brand. Advertising can affect consumer demand in many different ways. Becker and Murphy (Quarterly Journal of Economics 108:941–964, 1993) have argued that the “presumptive case” should be that advertising works by raising marginal consumers’ willingness to pay for a brand. This has the effect of flattening the demand curve, thus increasing the equilibrium price elasticity of demand and the lowering the equilibrium price. Thus, “advertising is profitable not because it lowers the elasticity of demand for the advertised good, but because it raises the level of demand.” Our empirical results support this conjecture on how advertising shifts the demand curve for 17 of the 18 brands we examine. There have been many prior studies of how advertising affects two equilibrium quantities: the price elasticity of demand and/or the price level. Our work is differentiated from previous work primarily by our focus on how advertising shifts demand curves as a whole. As Becker and Murphy pointed out, a focus on equilibrium prices or elasticities alone can be quite misleading. Indeed, in many instances, the observation that advertising causes prices to fall and/or demand elasticities to increase, has misled authors into concluding that consumer “price sensitivity” must have increased, meaning the number of consumers’ willing to pay any particular price for a brand was reduced—perhaps because advertising makes consumers more aware of substitutes. But, in fact, a decrease in the equilibrium price is perfectly consistent with a scenario where advertising actually raises each individual consumer’s willingness to pay for a brand. Thus, we argue that to understand how advertising affects consumer price sensitivity one needs to estimate how it shifts the whole distribution of willingness to pay in the population. This means estimating how it shifts the shape of the demand curve as a whole, which in turn means estimating a complete demand system for all brands in a category—as we do here. We estimate demand systems for toothpaste, toothbrushes, detergent and ketchup. Across these categories, we find one important exception to conjecture that advertising should primarily increase the willingness to pay of marginal consumers. The exception is the case of Heinz ketchup. Heinz advertising has a greater positive effect on the WTP of infra-marginal consumers. This is not surprising, because Heinz advertising focuses on differentiating the brand on the “thickness” dimension. This is a horizontal dimension that may be highly valued by some consumers and not others. The consumers who most value this dimension have the highest WTP for Heinz, and, by focusing on this dimension; Heinz advertising raises the WTP of these infra-marginal consumers further. In such a case, advertising is profitable because it reduces the market share loss that the brand would suffer from any given price increase. In contrast, in the other categories we examine, advertising tends to focus more on vertical attributes.

The Typicality and Accessibility of Consumer Attitudes Toward Television Advertising: Implications for the Measurement of Attitudes Toward Advertising in General

Despite the wide array of contemporary advertising formats and media, television advertising remains the most dominant form to which typical consumers are exposed. Research on attitudes toward advertising in general (Att-AiG) implicitly assumes that the Att-AiG measure represents advertising as a whole. A major finding of the current research is that consumers tend to have a mental representation, or exemplar, of the most typical type of advertising—television advertising—when they report their Att-AiG. Therefore, in reality, Att-AiG primarily reflects attitudes toward television advertising. In addition, the results of our experiments indicate that television ad exemplars generate temporal changes in consumers’ reported Att-AiG and attitudes toward television advertising. Theoretical and practical implications are discussed.     

How Related Multiscreening Could Positively Affect Advertising Outcomes

The use of multiple screens, also known as multiscreening, is assumed to have detrimental consequences for advertising outcomes. However, many people are engaging in this form of media multitasking on a daily basis. Therefore, it is important to focus on how to improve the effectiveness of advertisements when multiscreening. The aim of this study is to examine a key facilitator of advertising effects when multiscreening, namely task relevance. In two separate experiments—an online study (n = 280) and a laboratory (n = 185) study—we showed that people who engage in related multiscreening have better brand memory and more positive brand attitudes than people who engage in unrelated multiscreening via attention and subsequent program involvement. The results of the current study contribute to our understanding of multiscreening and advertising effects by showing that multiscreening does not always have to be detrimental to advertising effects. Furthermore, this study is unique because it combines two methodological approaches of multiscreening research.     

Phenomenology of Aesthetic Organising--Ways Towards Aesthetically Responsive Organizations

Through explication of a visual research method, this paper theorizes how masculine identity interacts with consumption—of imagery, products, desires, and passions in advertising and consumer culture. We analyze the male body as a discursive “effect” created at the intersection of consumption and several marketing discourses such as advertising, market segmentation, and visual communication, balancing between brand strategy—what the marketer intends—and brand community—the free appropriation of meaning by the market. The paper’s contribution rests in extending previous work on male representation into historical, ontological, and photographic realms, providing a necessary complement between understanding advertising meaning as residing within managerial strategy or wholly subsumed by consumer response. We argue that greater awareness of the connections between the traditions and conventions of visual culture and their impact on the production and consumption of advertising images leads to enhanced ability to understand how advertising works as a representational system and signifying practice.     

Brand Authenticity: Testing the Antecedents and Outcomes of Brand Management's Passion for its Products

While customer orientation is accepted as a core marketing principle, this research suggests that an opposing orientation—product orientation—may offer an advantage. Managers who follow a product orientation focus on products that interest and inspire them rather than on products that fulfill consumers’ desires. This research suggests that a consumer's perception that managers follow a product orientation is consistent with prior conceptualizations of brand authenticity. That research suggests that brands perceived as authentic are evaluated more positively, yet that research does not empirically assess brand authenticity's effects nor suggest its antecedents. To fill this gap, the authors develop a conceptualization and model of brand authenticity grounded in self‐determination theory, attribution theory, and extant authentic human brand research. Brand authenticity is defined as the extent to which consumers perceive that a brand's managers are intrinsically motivated in that they are passionate about and devoted to providing their products. The model proposes four antecedents of brand authenticity—two related to rare brand behaviors (uniqueness and scarcity), and two related to stable brand behaviors (longevity and longitudinal consistency). It also proposes two perceptual outcomes of brand authenticity—expected quality and trust. Two 2 × 2 experiments (n = 136 for Study 1; n = 155 for Study 2) demonstrate a positive impact of the antecedents on brand authenticity and of brand authenticity on the outcomes. Brand authenticity mediates these effects.     

Why Consumers in Developing Countries Prefer Foreign Brands: A Study of Japanese Brands in Vietnam

ABSTRACT

Building on social-identity theory, the research develops a model for understanding of the impact of consumer identification with a nation on consumers' brand evaluations. It posits that developing-country consumers' identification with a foreign (developed) nation influences three factors—consumer-based brand equity, consumer-based country image, and consumer-based brand credibility. The research was informed by data from 400 Vietnamese consumers in relation to two Japanese brands Sony and Honda and analyzed using structural equation modeling (SEM). The findings show that Vietnamese (developing-country) consumers prefer Japanese (developed-country) brands over domestic brands, when these consumers identify with the developed nation.     

The Extensions of Synergy

Abstract

Building brand identity becomes more difficult in a media-saturated culture, making it difficult to get a commercial message through to its audience, and requiring marketers to develop evermore omnipresent devices for reaching consumers. Corporations use synergy as a way of conveying consistent brand messages through multiple venues. Those venues have expanded beyond our conventional notions of the mass media, however, and increasingly rely on physical environments such as theme parks, casinos, and even residential communities to communicate and reinforce brand messages. These places, artificially constructed environmental simulacra, obscure the distinctions normally made between the cinematic world and the real world. The transformation of space into a new advertising medium has significant cultural implications.     

Caring for her: the influence of presumed influence on female consumers’ attitudes towards advertising featuring gender-stereotyped portrayals

ABSTRACT

This study investigates how presumed influence on others affects women's evaluations of advertising featuring gender stereotypes. Previous research has largely overlooked the social context of the reactions to gender stereotypes. Addressing that gap, this study draws on the influence of presumed influence model to proposed that female consumers believe that other women are negatively affected by advertising that contains gender-stereotyped portrayals. This perception is hypothesized to influence ad and brand attitudes as consumers ‘punish’ the brand for hurting others. The results of two experimental studies featuring stereotyped and non-stereotyped advertising portrayals indicate that the hypothesis holds for two types of stereotype components (physical characteristics and role behaviour). This new theoretical perspective to the literature on gender stereotypes in advertising, one that helps to explain why many women dislike gender stereotypes in advertising even though those stereotypes often have limited impact on them personally.     

How sponsorship transparency mitigates negative effects of advertising recognition

The proliferation of covert online advertising formats such as advergames has raised concerns about consumers’ ability to recognize such content as advertising and about how recognition affects evaluative outcomes. The present research utilized an online experiment (N?=?179) to examine differences between covertness of advertising format (advergame vs. online video commercials) on advertising recognition, and whether sponsorship transparency mediates – and mitigates – the negative effects of advertising recognition on attitude toward the ad, attitude toward the brand, and purchase intent. The results show that covertness of advertising format, recognition, and sponsorship transparency all shape consumers’ responses to online ads. Specifically, the predicted negative indirect effect of covertness of advertising format on attitudes and behavioral intention via advertising recognition reversed valance when sponsorship transparency was included in the serial mediation model.     

How advertising in offline media drives reach of and engagement with brands on Facebook

ABSTRACT

Research investigating the drivers of consumers’ engagement with brands on social media is proliferating. However, little is known about how advertising outside social media drives engagement with brands on social media. This study aims to explore the relation between advertising spend in different offline media (TV, radio, newspapers, magazines, out of home), and reach of and engagement with brand pages on Facebook. The study uses a unique real-life data-set containing information about the Facebook pages of 45 brands for approximately three years combined with Nielsen Advertising Spend data. Results showed that while advertising in offline media influenced organic and viral reach, the number of page likes was directly influenced by advertising on Facebook only. It can be concluded that offline advertising is relevant in driving consumers’ online brand engagement; however, there is a unique set of drivers for organic reach, viral reach and likes.     

It's no longer mine: the role of brand ownership and advertising in cross-border brand acquisitions

Although cross-border brand acquisitions are increasingly common in the global marketplace, research on how consumers respond to them is limited. Building on social identity and psychological ownership theories, we introduce the concept of brand ownership to the advertising literature, and show its negative effects on consumer reactions to a brand acquisition. Furthermore, we demonstrate that consumers’ disidentification (i.e., an oppositional motivation) with an acquiring country moderates the negative effect of consumers’ brand ownership on consumer attitudes after a brand acquisition. The results reveal that consumers with high levels of brand ownership develop more negative post-acquisition brand attitudes when a brand is acquired by a country with which consumers strongly disidentify (i.e. dissociative vs. out-group). Furthermore, our research introduces the concept of a brand ownership appeal in advertising, and demonstrates that it is an effective advertising strategy in enhancing post-acquisition brand attitudes for consumers with high levels of brand ownership. Important theoretical and managerial advertising implications conclude this research.     

Celebrity endorsement: How celebrity–brand–user personality congruence affects brand attitude and purchase intention

The present study provides and tests a conceptual framework aimed at comparing the relative effectiveness of celebrity–user, brand–celebrity, and user–brand personality congruence on brand attitude and brand purchase intention (BPI) thereafter. The data collection was done via an online survey of a representative group of consumers (n = 431) located across India. Hypotheses were tested using regression analysis with mediation approach. The results indicate that while user–brand and brand–celebrity personality congruence have a significant impact on brand attitude and purchase intention, celebrity–user congruence does not. Further, brand attitude is found to be a partial mediator on the relationship between the pair-wise personality congruence on BPI. The findings have major implications for marketers in understanding the significance of personality congruence among celebrity–brand–user in the formation of brand attitude and purchase intention that can be used in positioning and in increasing the advertising effectiveness of brands using celebrity endorsement. The present study is a pioneer in contributing to the celebrity endorsement literature by investigating the relative impact of three pairs of personality congruence: celebrity–brand, brand–user, and celebrity–user, on brand attitude and BPI, thereby supporting the applicability of McCracken's Meaning Transfer Model [McCracken (1989), The Journal of Consumer Research, 16 (3) 310–321) and the Hierarchy-of-effects model (Lavidge and Steiner (1961), Journal of Marketing, 25 (6) 59–62].     

Book Review

Media fragmentation and proliferation, in concert with declining television advertising efficacy, has engendered interest in developing more effective ways to reach consumers – particularly non-users of a brand. This study explores the effect of active product placement in computer games on both brand attitude (A_brand) and recall. Findings suggest that exposure to a particular brand in a computer game can increase A_brand among consumers whose pre-existing attitude towards the brand in question is fairly low. We conclude that product placement within computer games is an effective means of fostering high spontaneous brand recall and even of influencing consumers less positively predisposed towards a brand (analogous to non-users). These findings have promising managerial implications for firms looking to grow their customer base through acquisition and conversion.     

Gossage Revisited: Reflections of Advertising's Legendary Iconoclast

This article is an examination of the Supreme Court decisions that pertain to the status of advertising under the First Amendment's freedom of speech provision. The author asks to what extent national advertising—commercial communication from producers to consumers promoting the producers' brands—is constitutionally protected, and concludes that instead of giving the national advertiser greater freedom, the Court may have reduced his freedom by expecting more legitimate commercial information. In Virginia Pharmacy the Court made it clear that protection did not preclude regulation to insure that “the stream of commercial information flow(s) cleanly as well as freely.”     

Repetitive Advertising to Deter Entry

This paper develops a model in which advertising not only informs consumers of brands, but also can influence consumer brand choices through its repetition. By examining a multi‐stage game in which two firms sequentially advertise before simultaneously setting a price, we show that repetitive advertising can be a legitimate entry‐deterrence weapon available to an incumbent in subgame perfect equilibrium. This demonstrates that firms’ conduct of advertising repetition has anticompetitive implications.     

Consumers’ responses to native vs. banner advertising: moderation of persuasion knowledge on interaction effects of ad type and placement type

Applying advertising contextual theory, we examined the conditions under which native advertising embedded in a news website was more effective. With the use of college students (n = 189), a 2 (type of ad: native vs. banner) × 2 (type of ad placement: solo vs. duo) × 2 (persuasion knowledge: high vs. low) online experimental design was employed. In the solo condition, native advertising was evaluated more favorably than banner advertising in perceived fit, ad credibility, brand attitudes and click intention. Significant interaction effects between ad type and placement type were found on all dependent variables, with native advertising showing a significant decrease in duo (vs. solo) placement. These interaction effects appeared to be more pronounced for consumers with high persuasion knowledge, confirming its moderating role. Theoretical and managerial implications were discussed regarding the strategic placement of native advertising in news websites.     

Modeling the Effects of Green Advertising on Brand Image: Investigating the Moderating Effects of Product Involvement Using Structural Equation

ABSTRACT

?This experimental study examined consumers’ response to green advertising for high- and low-involvement products by measuring its effect on consumers’ intention to purchase such brands. The present study enhances our understanding of the moderating role of product involvement and extends the structural equation tests of the four causal models. A dataset of 169 respondents is used to examine the role of brand image and brand attitude in the context of green advertisements. Consistent with earlier findings, the suggested model provides a good fit of the data and results indicate that positive attitude toward green advertisements, brand image, and attitude toward the brand enhances the chances of consumers’ purchase intention of such brands. The study also verifies that product involvement moderates the positive relationship between attitude toward green advertisements and brand image such that at higher levels of product involvement, attitude toward green advertisements has a stronger effect on brand image.     

Has Advertising Lost Its Meaning? Views of UK and US Millennials

The findings of a study of Millennials in USA and the UK—an increasingly important and digitally savvy segment of consumers—reveal that they see advertising as Companies promoting a product or service to people through media. Their perception is simple and all-encompassing with no evidence that they distinguish between different types of media or different types of communication. Some variation between the views of Millennials in the two countries is also identified, although this is less than expected. The findings contribute to an important and continuing debate among academics and marketing practitioners over how advertising should be defined in today’s multichannel environment. The findings are also compared with other recent definitions of advertising, and their implications are discussed.     

Exciting on Facebook or competent in the newspaper? Media effects on consumers’ perceptions of brands in the fashion category

Abstract

Media investments are continuously shifting from traditional media like newspapers to digital alternatives like websites and social media. This study investigated if and how media choice between the two rival channels can influence consumers’ perceptions of a novel brand. 504 Swedish retail fashion customers participated in an experiment to evaluate the identical advertisement placed either in a national newspaper or on Facebook. The results revealed that advertising in a newspaper can have a positive effect on brand equity facets and purchase intention through brand personality perceptions of being competent, while advertising on Facebook have similar effects but through perceptions of being exciting. Besides some evidence that choice between traditional and new media affects brand personality this study is one of the first attempts to incorporate media channel choice into the broader customer-based brand equity framework. The results from this particular study suggest that media channel choice should be considered from a brand equity building perspective at least in the fashion category. This study shows that different media channels could complement each other strategically, as traditional media channels still can have valuable and unique contributions to brand building through brand personality perceptions, especially for brands striving to be perceived as competent.