Advertising research:Quantitative perspectives23E30000 Advertising and Consumer BehaviorFall 2010Antti Vassinen   2010–11–...
Antti Vassinen•  M.Sc. in Industrial Engineering (HUT) + IDBM•  Marketing lecturing (HSE, HUT) since 2004•  Marketing rese...
Agenda this week: topics•  Advertising and consumer psychology   –  The mechanics for causing change in behavior•  Quantit...
Agenda this week: Tuesday•  Understanding marketing performance   –  Models and frameworks•  Effects of advertising   –  H...
Agenda this week: Thursday•  Connecting advertising spend with results: industry   practices and problems   –  Visiting le...
Model-building•  Types of model   –  Normative   –  Descriptive   –  Predictive•  Consumer durbles & sales force optimizat...
Models of advertising effectsMarket response                   (–)         No intermediate advertising(Sales response)    ...
EAC space1.  Experience   –    …of product, brand, product category, sales channel,        experimentation, meeting affect...
Generalizations from advertisingresearch (Vakratsas & Amber 1999)1.  Experience, affect and cognition are the three key   ...
Advertising context•  Research needs from Vakratsas & Ambler (1999)   –    Goal diversity vs. effect diversity   –    Prod...
Linking activities with financial results   Marketing          Intermediate   Financial    action              outcome    ...
Rust, Lemon &Zeithaml 2004“Return on marketing”          Conceptual models     (Consumer experiments)          Econometric...
Cash flow =The ultimate marketing metric1.  Growth rate    –  Sell more of old stuff to existing customers    –  Sell new ...
Return on marketing investment  Short-term                           Long-term          Real(incremental)                 ...
Effects of advertising1.  Short-term effects (= incremental, current)   –    Small & fragile for advertising cf. other mar...
Temporal effects of advertising   (A) Current effect                        (B) Carryover effects                         ...
Linear & nonlinear responses     Sales                Concave                             p   ed                       S-s...
Wearin & wearout effects(pulsing schedule)                Advertising wearin        Sales                                 ...
Antti Vassinen2010–11–1619
Technological transformation•  Web 2.0 -> semantic web•  New exchange systems•  Tracking behavior and preferences online  ...
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Vassinen2010_161110

  1. 1. Advertising research:Quantitative perspectives23E30000 Advertising and Consumer BehaviorFall 2010Antti Vassinen 2010–11–16 Department of Marketing and Management
  2. 2. Antti Vassinen•  M.Sc. in Industrial Engineering (HUT) + IDBM•  Marketing lecturing (HSE, HUT) since 2004•  Marketing research and coordinating StratMark at HSE since 2005•  Managerial/executive education and consulting•  Dissertation (soon) on using fuzzy logic to analyze complex causes behind marketing outcomes•  Other interests in information and interaction design, European history and house music Antti Vassinen 2010–11–09 2010–11–16 antti.vassinen@aalto.fi 2
  3. 3. Agenda this week: topics•  Advertising and consumer psychology –  The mechanics for causing change in behavior•  Quantitative advertising research –  Quantifying the effects•  Practical applications Antti Vassinen 2010–11–16 3
  4. 4. Agenda this week: Tuesday•  Understanding marketing performance –  Models and frameworks•  Effects of advertising –  Hierarchies, cognition, affect & experience –  Response models•  Current challenges and future directions –  Consequences of technology on STP and effective marketing•  Targeting online advertising based on media content and individual interests –  Visiting lecture by Dr. Petrus Pennanen (CEO), Leiki Oy Antti Vassinen 2010–11–16 4
  5. 5. Agenda this week: Thursday•  Connecting advertising spend with results: industry practices and problems –  Visiting lecture by Klaus Kuhanen (CEO) and Anna Vähäsalo (Research Manager), JCDecaux Finland Oy•  Valkee case study presentations Antti Vassinen 2010–11–16 5
  6. 6. Model-building•  Types of model –  Normative –  Descriptive –  Predictive•  Consumer durbles & sales force optimization•  Approximations of reality –  Hard to find –  Difficult to parametrisize –  Inaccessible to managers –  Incomplete Antti Vassinen 2010–11–16 6
  7. 7. Models of advertising effectsMarket response (–) No intermediate advertising(Sales response) effects consideredCognitive information C “Think”Pure affect A “Feel”Persuasive hierarchy CA “Think” » “Feel” » “Do”Low-involvement hierarchy CEA “Think” » “Do” » “Feel”Integrative (C)(A)(E) Hierarchy not fixed, depends on product, involvementHierarchy-free NH No particular hierarchy of effects of proposed (Vakratsas & Amber 1999) Antti Vassinen 2010–11–16 7
  8. 8. EAC space1.  Experience –  …of product, brand, product category, sales channel, experimentation, meeting affect2.  Affect –  Utilitarian and hedonic attitudes –  Toward ad, product, brand… –  Product positioning3.  Cognition –  Product differentiation+ Self-expression in all three Antti Vassinen 2010–11–16 8
  9. 9. Generalizations from advertisingresearch (Vakratsas & Amber 1999)1.  Experience, affect and cognition are the three key intermediate effects2.  Short-term advertising elasticities are small and decrease during the PLC3.  In mature, frequently purchased packged goods markets, returns to advertising diminish fast (1-3 reminders per cycle enough)4.  The concept of a space of intermediate effects is supported but a hierarchy is not5.  Cognitive bias interferes with affect measurement Antti Vassinen 2010–11–16 9
  10. 10. Advertising context•  Research needs from Vakratsas & Ambler (1999) –  Goal diversity vs. effect diversity –  Product category effects on models –  Interaction with competition –  Wider scope of marketing actions (marketing mix) –  PLC stage –  Customer heterogeneity•  Effects of actions on –  Market structure & institutions –  Competitors –  Intangible assets•  Complex, nonlinear interactions & synergies•  Diverse & evolving markets Antti Vassinen 2010–11–16 10
  11. 11. Linking activities with financial results Marketing Intermediate Financial action outcome results Brand Price TV ads preference premium (Stewart 2009) Antti Vassinen 2010–11–16 11
  12. 12. Rust, Lemon &Zeithaml 2004“Return on marketing” Conceptual models (Consumer experiments) Econometric models CLV modeling Sales response models Antti Vassinen 2010–11–16 12
  13. 13. Cash flow =The ultimate marketing metric1.  Growth rate –  Sell more of old stuff to existing customers –  Sell new stuff to existing customers –  Get new customers2.  Operating profit margin –  Decrease costs –  Increase prices3.  Working capital Affecting these –  Fixed and variable must also be the –  Cost of capital purpose of any –  Role of assets (=leverage) advertising!4.  Decrease volatility –  Even out cash flows for reduced risk Antti Vassinen 2010–11–16 13
  14. 14. Return on marketing investment Short-term Long-term Real(incremental) (persistent) options effects effects - - - Future Incremental Brand equity opportunities sales Candidate for Candidate for Idiosyncraticshared stadard shared stadard to firm Antti Vassinen 2010–11–16 14 (Stewart 2009)
  15. 15. Effects of advertising1.  Short-term effects (= incremental, current) –  Small & fragile for advertising cf. other marketing mix components2.  Long-term effects (= persistent, carryover) –  Complex to model3.  Shape effects –  Advertising elasticity & operating context4.  Competitive effects –  Relative measures useful5.  Dynamic effects –  Wearin, wearout, hysteresis6.  Content effects –  #1 source of variation; role of creativity; consumer experiments7.  Media effects Antti Vassinen 2010–11–16 15
  16. 16. Temporal effects of advertising (A) Current effect (B) Carryover effects of long duration X X X X X (C) Carryover effects (D) Persistent effect of short duration X X X X X Antti Vassinen 2010–11–16 16
  17. 17. Linear & nonlinear responses Sales Concave p ed S-sha Advertising Antti Vassinen 2010–11–16 17
  18. 18. Wearin & wearout effects(pulsing schedule) Advertising wearin Sales Advertising wearout Base sales X X X X X X Time Advertising eXposures Antti Vassinen 2010–11–16 18
  19. 19. Antti Vassinen2010–11–1619
  20. 20. Technological transformation•  Web 2.0 -> semantic web•  New exchange systems•  Tracking behavior and preferences online –  Visibly and less visibly•  AI recommender systems –  Expert systems•  Preference ontologies for information discovery –  Expert –  Social –  Full AI•  Implications for STP? Antti Vassinen 2010–11–16 20

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