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.

A comparison of parents' and children's knowledge of brands and advertising slogans in the United States: implications for consumer socialization

Research in the area of consumer socialization suggests that parents act in an agent–learner relationship with their preadolescent children and have the greatest influence on their young children's purchase behaviour. The present study examines this assumption in light of changes in family roles and composition, media exposure and marketing efforts aimed at children. A cognitive recognition test of advertising slogans drawn from recent television commercials is used to determine knowledge levels of a sample of preadolescent children and their parents. Results suggest that children, beginning at age nine, have as much knowledge of advertising slogans as do their parents, even in product categories targeted at adults.     

Interaction effects of mood induction and nominal representation of price on consumer choice

The transition to the euro in several European countries causes consumers to make mistakes in economic transactions. One mistake referred to as the “euro illusion” is the tendency to evaluate prices on the basis of their nominal representation, thus overestimating or underestimating how expensive products are. Investigating effects of the euro illusion on consumer choice as well as moderating effects of mood, three laboratory experiments were conducted employing convenience samples of students. In Experiment 1 a bias toward the nominal representation was demonstrated when participants chose an unfamiliar (fictitious) large-unit currency (small numbers) for paying the price of a consumer product but chose an unfamiliar small-unit currency (large numbers) for obtaining a salary. The bias was larger for participants who were induced to feel positive and deactivated (calm and relaxed) than for participants who were induced to feel negative and activated (anxious and jittery). The difference in frequencies of choice of currency were replicated in Experiment 2. No effects were, however, found of natural mood assessed by self-report ratings. In Experiment 3 choices of more expensive consumer products with additional features were more frequent when the prices were expressed in the large-unit currency than when expressed in the small-unit currency. Neither in this case did self-reported natural mood affect the choices.     

Product information and consumer choice confidence in multi-item sales promotions

This research augments efforts to produce a richer understanding of the drivers of consumer choice confidence. It examines the interplay between two marketing interventions that consumers encounter in retail marketplaces, diagnostic product information and multi-item sales promotions. Results indicate that the influence of product information varies as a function of sales promotion format. The information effect is weaker when consumers are allowed to select the products that will be included in the promotion. Perception of information adequacy is revealed as a mediator of the information diagnosticity effect. The implications for marketing theory and promotional strategy are discussed.     

On consumer choice patterns and the net impact of feature promotions

Even in the digital age, feature promotions continue to receive significant investments from CPG manufacturers and retailers. Whether this is money well spent depends on consumers' (heterogeneous) tendency to switch brands or stores in response to features. This study proposes a ‘Mixed-pattern Random-effects Nested Logit’ (MRNL) model to analyse the effect of feature promotions in a multi-retailer multi-brand setting. Across 16 different CPG categories, our results reveal that in all cases a mixture of choice patterns prevails: about half of households exhibit a brand focus (i.e. rather substitute between stores offering that brand), the remaining half show evidence of a store focus (i.e. rather substitute brand offers within a visited store). We find that the size of the promotion lift and its underlying sources differ substantially between patterns. Brand-focused consumers are generally more responsive to feature ads than store-focused consumers – especially in low-concentration categories; while they imply much stronger cannibalization for the manufacturer, and much weaker cannibalization for the retailer. It follows that retailers reap much higher benefits in the brand-focused segment, while manufacturers may not prefer that segment in terms of net gains and must be wary of subsidizing those consumers. We identify household and category characteristics that underlie the choice patterns and offer opportunities for targeting.     

The effects of emotion and need for cognition on consumer choice involving risk

Building upon previous research, this article proposes that the effect of mood on risk-taking is moderated by the individual’s need for cognition. The hypothesized effect of mood and the need for cognition are tested with different types of consumer choices in three studies. Consistent with the hypotheses, the results indicate that the subjects in happy mood tend to be risk-aversive while the subjects in sad mood incline to take risks. Furthermore, the mood affects risk-taking behavior more for the low-NFC subjects than for the high-NFC ones. Finally, implications of the findings and suggestions for future research are discussed.     

Advertising time expansion, compression, and cognitive processing influences on consumer acceptance of message and brand

This article examines the nature of consumer process involvement and cognitive processing of advertising content as mediating variables between commercial message executions (e.g., broadcast time compression and expansion and using broadcast versus print media) on attitude and behavioral intentions. The article proposes a framework that builds on the prior work of Krugman, Wright, and MacInnis and colleagues; the framework includes hypotheses of an advertising execution and processing involvement interaction effect on cognitive processing of commercial messages and a substantial direct effect of cognitive processing on attitude and behavioral intention. The article includes details of an experiment testing hypotheses in the framework. The findings provide strong support of the hypotheses. Implications for advertising strategy include adopting a conservative view on the use of time compression in advertising commercials and nurturing low consumer processing involvement of commercial messages.     

Now or later: Delay's effects on post-consumption emotions and consumer loyalty

This study identifies differences in immediate and delayed post-consumption emotional assessments, triggering a dynamic shift in word-of-mouth evaluation and repurchase intention. Experiment 1 compares participants' responses to cellphone purchases in immediate and half-hour delay conditions. Experiment 2 generalizes the research scope by examining biscuit consumption and imposing an additional 24-hour delay. Results indicate that (1) products with higher hedonic value elicit excitement and cheerfulness, which intensify over time and increase consumer loyalty; (2) products with higher utilitarian value induce feelings of confidence and security, which gradually fade in intensity and diminish consumer loyalty over time; (3) products with lower hedonic value lead to dissatisfaction, which dissipates over time, and low-level consumer loyalty rises; and (4) products with lower utilitarian value generate feelings of anger, which grow over time and erode consumer loyalty.     

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.     

Thinking and feeling on the World Wide Web: the impact of product type and time on World Wide Web advertising effectiveness

This article focuses on the effectiveness of banner advertisements.Drawing from theory on functional versus expressive products and wear in versus wear out it argues that product type and time are important factors in World Wide Web (WWW) advertising. The results from a large empirical study are reported and show that responses to banner advertisements differ between functional and expressive products and over time. Functional product banner advertisements have higher initial click-throughs that quickly deteriorate and they have no effect through advertisement impressions. Expressive products need time to wear in as both click-through rates and positive brand attitudes from advertisement impressions increase with repeated exposures. These differences in consumer response are conceptualized as thinking and feeling on the WWW,thereby providing important implications for advertisers.     

If we label it, will they care? The effect of GM-ingredient labelling on consumer responses

More than 60% of foods in North American supermarkets contain GM ingredients. While North American consumers seem less concerned about GM foods than Europeans and Japanese, many consumer activists argue that consumers have a “right to know” if what they eat has GM ingredients. Will informative labelling of GM foods lead to major shifts in buying patterns? An experimental study found minimal effects of GM labelling overall but significant differential reactions to GM-labelled products across consumers with differing levels of consumer activism, perceived benefits of genetic engineering, and interest in novel foods with consumer benefits.     

Utterly fresh perspectives on consumer research and advertising: Introducing the special issue from the 2013 La Londe conference

This article provides an overview of the papers from the 40th La Londe Marketing Communications and Consumer Behavior Conference that were selected for this special issue of the Journal of Business Research. The La Londe conference is a biennial event that attracts top researchers from across the world. A small and selective conference, its intimacy combined with high-quality presentations serves as an incubator for new ideas and fresh perspectives on consumer research, and does so through an international lens that is reflected in the diversity of countries represented on the conference program, the co-chairs of the conference, and the La Londe Conference Scientific Committee.     

The influence of culture,emotions, intangibility,and atmospheric cues on online behavior

This paper examines how emotions and website atmospheric cues influence service tangibility and consumer attitudes. The proposed model was compared across three cultures: North America (Canada and U.S.), China, and the Middle East. The findings support the overall model and demonstrate several non-invariant paths across the groups. Particularly, the results suggest how the influences of two emotional dimensions (pleasure and dominance) on consumer perceptions of site atmospherics vary across cultures. Moreover, the effects of service tangibility dimensions (physical tangibility, specificity, and mental tangibility) on consumers' attitudes toward the website and service vary significantly across the three cultures. Mental tangibility has the greatest influence on North American customers' attitudes, while physical tangibility and specificity have the greatest impact on Chinese and Middle Eastern customers' attitudes, respectively.     

Super Bowl advertising: field testing the importance of advertisement frequency,length and placement on recall

This study investigates the effects of length, frequency and pod placement on advertising recall in a non-laboratory setting. Subjects were surveyed the day after Super Bowl XXVIII to determine recall of advertisements shown during the game. The results indicate that length and frequency positively and significantly influence advertisement recall.     

An heretical consumer research perspective on music,culture and heritage

ABSTRACT

This special issue presents both empirical and conceptual papers on music, culture, and heritage as a discursive site of human action and social interaction. The theme of this special issue of music, culture, and heritage are aspects symbolically embedded throughout the market, as well as within cultural and ritualistic practice. The work featured in this special issue captures the essence of the 2015 Heretical Consumer Research Revival conference held 28–30 September in New Orleans, LA (partially funded by Association of Consumer Research). This diverse gathering of critical thinkers and consumer researchers considered various avenues to enrich future directions for consumer culture research. In line with that conference, this special issue is oriented towards generating innovative, radical, and even heretical schools of thought in consumer culture research surrounding markets, music, culture, and heritage in a nonconventional, nonconformist manner.     

Culture, product type, and price influences on consumer purchase intention to buy personalized products online

With personalization, consumers can choose from various product attributes and a customized product is assembled based on their preferences. Marketers often offer personalization on websites. This paper investigates consumer purchase intentions toward personalized products in an online selling situation.The research builds and tests three hypotheses: (1) intention to purchase personalized products will be affected by individualism, uncertainty avoidance, power distance, and masculinity dimensions of a national culture; (2) consumers will be more likely to buy personalized search products than experience products; and (3) intention to buy a personalized product will not be influenced by price premiums up to some level. Results indicate that individualism is the only culture dimension to have a significant effect on purchase intention. Product type and individualism by price interaction also have a significant effect, whereas price does not. Major findings and implications are discussed.     

30年广告镜像:社会价值观念的嬗变(1979-2008)

本研究从中观层面入手,把中观层面的广告经营观变革分为五个阶段：产品力阶段（1979-1983）、文化力阶段（1984-1993）、媒介力阶段（1994-1997）、营销力阶段（1998-2003）和品牌力阶段（2004-2008）。在对广告界多位资深人士进行问卷调查和深度访问基础上,从中遴选出最具代表性的15个经典案例或事件。考察各阶段广告传播的微观波动——消费观,并从宏观角度寻找其与中观、微观律动的深层原因——时代观,以此管窥中国社会价值观念的变迁机制。     

An alternative perspective on relationships,loyalty and future store choice

Abstract

The purpose of this research was to provide an alternative perspective for retailers to develop relationships and loyalty. This study suggests that traditional trust and commitment theories are somewhat imperfect in predicting future store choice. Through path modelling, we introduce two additional constructs of store functional loyalty and relationship worth. These constructs together with commitment are powerful predictors of future store choice. Furthermore, the study examines the antecedents of relationships, loyalty and future store choice. We conclude with new insights and practical suggestions for retailers to build relationships, loyalty and influence customers' future store choice.     

Volunteering personal information on the internet: Effects of reputation, privacy notices, and rewards on online consumer behavior

Accurate personal information provision is one of the most important determinants of the commercial development of the Web. However, consumers are usually reluctant to provide personal information or tend to provide false information online because of their concern about privacy violation risks. We employ a 2× 2× 2 experimental design to examine the effects of reputation, privacy notices, and rewards on online consumer behavior in volunteering two types of personal information on the Internet: demographic information and personally identifiable information. We discuss the theoretical and practical implications of the findings.     

Narrative and metacognition as consumer mystery: A comment on Hill, Gaines, and Wilson and animal companions

Hill, Gaines, and Wilson [Hill RP, Gaines, J, Wilson RM. Consumer behavior, extended self, and sacred consumption: An alternative perspective from our animal companions, J Bus Res this issue.] provide us with a stimulating, moving account of consumers' relationships with their animal companions while ostensibly taking the latter's point of view. However, even though their approach likely reflects the viewpoint of many consumers and has value as fable or metaphor, I suggest, based on insights from comparative psychology and ethology, that greater metacognitive understanding of animal consciousness could produce fuller narratives as well as better reflecting consumer mystery. In concluding, I encourage readers to explore the dynamics of their own human-animal mystery through an introspective exercise.