The document summarizes a meta-analysis of over 1,000 estimates of short-term and long-term advertising elasticity from 56 studies published between 1960 and 2008. Some of the key findings include: the average short-term advertising elasticity is 0.12, lower than the prior estimate of 0.22; advertising elasticity has declined over time; and elasticity is higher for durable goods, early in a product's lifecycle, when using yearly vs. quarterly data, and when measured in gross rating points vs. monetary terms. The average long-term elasticity is 0.24, lower than the prior implied average of 0.41. The study provides new generalizations about how advertising effectiveness has changed over
An econometric measurement of the impact of marketing communication on sales ...Alexander Decker
This document summarizes a study analyzing the relationship between marketing communications (advertising, sales promotion, personal selling, direct marketing) and net sales revenue in the Indian cement industry. The study uses quarterly time series data from 10 cement companies over 7 years. It finds that while there is no long-term cointegrating relationship between the variables, VAR modeling suggests that advertising and sales promotion have a significant effect on cement sales after one year. Impulse response functions and forecast error variance decomposition also support the finding that marketing communications influence future sales.
This document summarizes key findings from research on how sales promotions work. It identifies three main empirical generalizations supported by multiple studies:
1) Temporary retail price reductions substantially increase short-term sales.
2) Higher market share brands are less responsive to promotions and have lower "deal elasticities".
3) Deeper price cuts and more frequent promotions generate greater sales responses than shallow discounts or infrequent deals.
The document also discusses topics that have generated inconsistent findings and important areas in need of further research. It aims to synthesize what is known about how promotions impact consumer purchase behavior based on existing academic literature.
This article examines how the market structure impacts the pricing objectives of service firms. It reviews literature on pricing objectives and market structure factors. The study aims to empirically investigate how market structure influences the pricing objectives pursued by service companies. Data was collected through interviews with 170 service firms across six sectors in Greece. The findings show that firms prioritize objectives around maintaining existing customers and attracting new ones to ensure long-term market position, while also considering financial factors. The impact of market structure on pricing objectives is examined.
This study examined how consumers perceive value from retail sale advertisements based on different price presentation formats. A large experiment tested how the size of sale discounts and the method of presenting sale information (e.g. showing regular price and sale price vs just sale price) influenced consumers' perceptions of savings, value, and offer acceptability. The size of discounts significantly impacted perceptions, with larger discounts resulting in greater perceived savings and value. The method of presenting information also significantly influenced perceptions, with formats including regular price and dollar amount off producing the highest responses.
This document summarizes a research paper that analyzes supermarket pricing strategies. The paper uses a unique store-level dataset to estimate a discrete choice model of pricing strategy selection as a static game. The model addresses three questions: 1) How do local demographics influence strategy choice? 2) Do some chains have advantages for certain strategies? 3) How do firms react to rival strategies? The key finding is that firms tend to choose strategies that match their rivals rather than differentiate, contradicting theories viewing pricing strategy as differentiation.
Understanding the effect of customer relationship management effors on custom...Wesley Pinheiro
The document discusses a study investigating the differential effects of customer relationship perceptions (CRPs) and relationship marketing instruments (RMIs) on customer retention and customer share development over time. The author develops a conceptual model examining how affective commitment, satisfaction, payment equity, loyalty programs, and direct mailings impact both customer retention and customer share development. The author hypothesizes that affective commitment and loyalty programs positively impact both outcomes, while direct mailings primarily influence customer share development. The study uses longitudinal data from a financial services company to test these hypotheses.
The document discusses a study investigating the differential effects of customer relationship perceptions (CRPs) and relationship marketing instruments (RMIs) on customer retention and customer share development over time. The author develops a conceptual model examining how affective commitment, satisfaction, payment equity, loyalty programs, and direct mailings impact both customer retention and customer share development. The author hypothesizes that affective commitment and loyalty programs positively impact both outcomes, while direct mailings primarily influence customer share development. The study uses longitudinal data from a financial services company to test these hypotheses.
Developing Relationships; consumers as a source for sustainable competitive a...Kevin Rommen
The world is changing thus business units should also be changing. The influences of social media and internet can no longer be neglected, case in point “Nestlé’s epic social media #fail”1. These changes are giving consumers more and more power in their relationship with business units. Furthermore the enormous amount of products available give consumers more and more possibilities to choose from. For example, at supermarkets in the USA you’ll find in the average week about 110 cereal brands in stock (Shum, 2004). The availability of that amount of different products/product-ranges within an industry raises the question to how business units can create competitive advantage within this enormous amount of competition, especially when the consumer is gaining power?
An econometric measurement of the impact of marketing communication on sales ...Alexander Decker
This document summarizes a study analyzing the relationship between marketing communications (advertising, sales promotion, personal selling, direct marketing) and net sales revenue in the Indian cement industry. The study uses quarterly time series data from 10 cement companies over 7 years. It finds that while there is no long-term cointegrating relationship between the variables, VAR modeling suggests that advertising and sales promotion have a significant effect on cement sales after one year. Impulse response functions and forecast error variance decomposition also support the finding that marketing communications influence future sales.
This document summarizes key findings from research on how sales promotions work. It identifies three main empirical generalizations supported by multiple studies:
1) Temporary retail price reductions substantially increase short-term sales.
2) Higher market share brands are less responsive to promotions and have lower "deal elasticities".
3) Deeper price cuts and more frequent promotions generate greater sales responses than shallow discounts or infrequent deals.
The document also discusses topics that have generated inconsistent findings and important areas in need of further research. It aims to synthesize what is known about how promotions impact consumer purchase behavior based on existing academic literature.
This article examines how the market structure impacts the pricing objectives of service firms. It reviews literature on pricing objectives and market structure factors. The study aims to empirically investigate how market structure influences the pricing objectives pursued by service companies. Data was collected through interviews with 170 service firms across six sectors in Greece. The findings show that firms prioritize objectives around maintaining existing customers and attracting new ones to ensure long-term market position, while also considering financial factors. The impact of market structure on pricing objectives is examined.
This study examined how consumers perceive value from retail sale advertisements based on different price presentation formats. A large experiment tested how the size of sale discounts and the method of presenting sale information (e.g. showing regular price and sale price vs just sale price) influenced consumers' perceptions of savings, value, and offer acceptability. The size of discounts significantly impacted perceptions, with larger discounts resulting in greater perceived savings and value. The method of presenting information also significantly influenced perceptions, with formats including regular price and dollar amount off producing the highest responses.
This document summarizes a research paper that analyzes supermarket pricing strategies. The paper uses a unique store-level dataset to estimate a discrete choice model of pricing strategy selection as a static game. The model addresses three questions: 1) How do local demographics influence strategy choice? 2) Do some chains have advantages for certain strategies? 3) How do firms react to rival strategies? The key finding is that firms tend to choose strategies that match their rivals rather than differentiate, contradicting theories viewing pricing strategy as differentiation.
Understanding the effect of customer relationship management effors on custom...Wesley Pinheiro
The document discusses a study investigating the differential effects of customer relationship perceptions (CRPs) and relationship marketing instruments (RMIs) on customer retention and customer share development over time. The author develops a conceptual model examining how affective commitment, satisfaction, payment equity, loyalty programs, and direct mailings impact both customer retention and customer share development. The author hypothesizes that affective commitment and loyalty programs positively impact both outcomes, while direct mailings primarily influence customer share development. The study uses longitudinal data from a financial services company to test these hypotheses.
The document discusses a study investigating the differential effects of customer relationship perceptions (CRPs) and relationship marketing instruments (RMIs) on customer retention and customer share development over time. The author develops a conceptual model examining how affective commitment, satisfaction, payment equity, loyalty programs, and direct mailings impact both customer retention and customer share development. The author hypothesizes that affective commitment and loyalty programs positively impact both outcomes, while direct mailings primarily influence customer share development. The study uses longitudinal data from a financial services company to test these hypotheses.
Developing Relationships; consumers as a source for sustainable competitive a...Kevin Rommen
The world is changing thus business units should also be changing. The influences of social media and internet can no longer be neglected, case in point “Nestlé’s epic social media #fail”1. These changes are giving consumers more and more power in their relationship with business units. Furthermore the enormous amount of products available give consumers more and more possibilities to choose from. For example, at supermarkets in the USA you’ll find in the average week about 110 cereal brands in stock (Shum, 2004). The availability of that amount of different products/product-ranges within an industry raises the question to how business units can create competitive advantage within this enormous amount of competition, especially when the consumer is gaining power?
This document discusses relationship marketing and its impact on organizational performance. It explores the theoretical foundations of relationship marketing and examines how adopting this concept affects performance indicators. Relationship marketing focuses on creating and sustaining long-term relationships with customers through mutual cooperation rather than short-term transactions. When organizations implement relationship marketing successfully through internal marketing and keeping promises to customers, it can lead to improved customer loyalty, retention and positive word-of-mouth, ultimately improving organizational performance. Interactive marketing and developing trust, empathy and reciprocity in customer relationships are important aspects of relationship marketing discussed in the document.
This document summarizes a study that aims to replicate a previous study on relationship values in business relationships. The original study identified eight key relationship values from the customer perspective in manufacturing supplier relationships. This replication study seeks to verify the original findings in the toy industry in Turkey. It will interview toy retailers and purchasing managers to determine if the same relationship values are important, and if there are any cultural differences compared to the original study. The goals are to improve understanding of relationship values, provide implications for managers, and enhance the validity and reliability of the original study findings.
Gurumurthy Kalyanaram on Advertising Response Function in Marketing ScienceGurumurthy Kalyanaram
Dr. Gurumurthy Kalyanaram is a well-known professor and academic leader, and an experienced business consultant and advisorDr. Gurumurthy Kalyanaramh as lectured in various universities including The London School of Economics, The University of Texas at Dallas (UTD), Jiang Xi University of Finance and Frankfurt School of Finance and Management.
The relationship between customer value and pricing strategiesshampy kamboj
This study empirically analyzes the relationship between customer value and market prices in the washing machines market. The researchers:
1. Used conjoint analysis to assess the customer value of attributes for a sample of 129 washing machine models. This provided a measure of customer value for each model.
2. Compared the customer values from the conjoint analysis to the actual market prices of the 129 models using regression analysis.
3. Found limited alignment between price and customer value, with overpricing and underpricing of products being common. This suggests that value-based pricing is not fully established in practice in this market.
This document summarizes a study that examined factors influencing consumers' decisions to repeatedly purchase over-the-counter (OTC) pharmaceutical brands. The study used a survey of 118 OTC consumers to test hypotheses based on the theory of planned behavior. It found that direct experience with a brand, price tolerance, brand trust, and opinions of others are important in determining repeat purchase behavior. Specifically, past experience with a brand was found to influence perceptions of trustworthiness, price sensitivity, and purchase behavior, while price sensitivity affected attitudes and intentions to repurchase.
This document summarizes research on the effects of price promotions and advertisements on brand evaluations. It finds that price promotions can negatively impact brand evaluations, but the effects are complex and depend on factors like past promotional history, consumer expertise, and industry norms. Promotions are more likely to lower evaluations when a brand has not been promoted before, when consumers lack expertise, and when promotions are uncommon in that industry. The document also examines how consumers perceive advertised discounts, finding they often discount the discounts and perceive lower savings than advertised levels, with higher discounts discounted more.
This document discusses three types of preference vectors that can be derived from preference data: aggregate, segment-specific, and differential. Aggregate vectors represent overall preferences, segment-specific vectors represent preferences of particular customer segments, and differential vectors indicate areas of greatest difference in preferences between customer segments. These three vectors correspond to strategies of undifferentiated marketing, differentiated/concentrated marketing, and product-oriented selling, respectively. The document illustrates these concepts using data from a study of preferences for jazz musicians among radio listeners, analyzing preference patterns and deriving preference vectors to provide strategic insights for a jazz radio station's programming decisions.
A conceptual framework for customer value within a distribution systemfredrickaila
This document provides a conceptual framework for understanding customer value within a distribution system. It proposes that customer value in a distribution system can be conceptualized as the interactions among several key factors: customer service, order cycle time, inventory levels, warehouse locations, transportation methods, and customer complaints. The framework suggests linear relationships between these factors and hypothesizes that higher levels of customer service, shorter order cycle times, and fewer complaints will lead to higher perceived customer value. The conceptual model is intended to help managers design distribution strategies focused on maximizing customer value.
This document provides instructions for an assignment using system dynamics modeling to analyze competitive dynamics in a chosen organization and market. Students are asked to:
1) Choose an organization and develop stock and flow diagrams capturing important feedback processes driving demand.
2) Assess factors determining product attractiveness through graphs and determine which factors are most influential.
3) Evaluate the organization's current strategy based on its position relative to attractiveness factors and the industry feedback processes.
4) Write a 4-page report summarizing the analysis, strategic assessment, and recommendations for modifying strategy to be more robust and advantageous.
This study analyzed order fulfillment times for 1,000 products ordered from Amazon and other major online retailers to compare their performance. The results showed that on average, Amazon fulfilled orders in 1.92 days while other retailers took 4.81 days. Amazon delivered orders faster than competitors for 81% of products. Amazon had particularly strong fulfillment for books, delivering orders on average twice as fast as other retailers. The study concludes that Amazon's superior fulfillment infrastructure gives it a significant competitive advantage over retailers that have not invested similarly in online order fulfillment.
The document discusses a study that aimed to develop and empirically test a conceptual framework explaining the influence of the sales force on brand equity in business-to-business (B2B) contexts. The study developed a framework incorporating four key drivers of B2B brand equity identified in the literature: the salesperson's personality, the salesperson's behavior, product quality, and non-personal marketing communications. It then empirically tested hypotheses about the effects of these drivers on brand equity with a sample of 201 B2B firms in Germany. The results confirmed the high relevance of the sales force for building and maintaining strong B2B brands, with the salesperson's behavior being the most important driver, followed by their personality, product
Probabilistic selling is a marketing strategy that multi-item vendors provide to consumers, presenting
discounted options through acceptance of uncertain risks with random selections from sets of multiple distinct
items. However, past studies of this strategy assume a no return policy since returned items shift part of the
mentioned uncertain risk to the retailer. Because returns are a common business practice and an important
coordination tool in supply chains, this research identifies the impacts of a return policy on the efficacy of
probabilistic selling models
This chapter discusses different methods of measurement and scaling used in marketing research. It describes four primary scales of measurement - nominal, ordinal, interval, and ratio scales - and explains their characteristics. Comparative scaling techniques like paired comparisons, rank ordering, and constant sum scaling are presented, which involve direct comparisons between objects. Noncomparative scales that measure objects independently are also covered. The chapter provides examples to illustrate different scaling methods and their applications in marketing research.
Optimal pricing and delayed incentives in a heterogeneous consumer marketHari Rajagopalan
This paper develops a profit maximization model to determine the optimal price and rebate value for a product sold to heterogeneous consumers. The model divides consumers into three segments: rebate-independent, fully rebate-dependent, and partially rebate-dependent. It finds that three factors are critical in determining the effectiveness of rebates: 1) the reference value that represents the effort cost of redeeming a rebate, 2) the distribution of consumers among the three segments, and 3) the ratio of demand increase from a $1 rebate to a $1 price decrease, known as rebate attractiveness. The model is solved for linear and convex redemption rates and shows that higher reference values and more partially rebate-dependent consumers
Material in slides 2 14 of this overview adapted from prinADDY50
The document discusses marketing channels and pricing strategies. It covers topics like typical marketing channels including direct and indirect channels. It also discusses functions of channel partners like promoting brands and distributing products. The document then talks about factors that affect pricing decisions like costs and competitors' prices. It provides examples of pricing strategies such as introductory, cost-plus, and promotional pricing.
C3 impact of target marketing on advertising attitudes[1]SNSPA, Bucharest
This study examines the impact of target marketing on both the intended target audience and unintended "nontarget" audience. Three experiments show that target marketing can have unfavorable effects on nondistinctive groups in the nontarget market, such as Caucasian or heterosexual individuals, whereas distinctive groups in the target market, such as African American or homosexual individuals, respond more favorably. Experiment 2 demonstrates that feelings of similarity or targetedness influence these effects differently for distinctive versus nondistinctive groups. Experiment 3 shows these feelings are associated with the psychological processes of identification and internalization. The findings have implications for understanding the effects of distinctiveness in persuasion and potential social impacts of target marketing.
This document summarizes sales promotion models. It begins by providing background on the growth of sales promotion modeling in both academia and industry. Descriptive models measure the effects of promotions, while prescriptive models make recommendations. The document reviews key phenomena and models for coupons, trade promotions, and retailer promotions. For coupons, redemption rates and incremental sales are critical to model. Regression is commonly used to predict redemption rates based on factors like distribution method, brand loyalty, and previous promotions. Descriptive models are needed to understand promotional effects before building prescriptive models that optimize profitability.
The document summarizes the definition and evolution of integrated marketing communications (IMC) and the traditional roles of advertising agencies. It provides an overview of how IMC has been defined by various academics and organizations. Key aspects of IMC definitions include coordinating marketing messages, building customer relationships, and maximizing impact on brands. The traditional roles of agencies focused on separate functions like creative, media, and research, rather than integrated strategies. The document then discusses the methodology for a content analysis of Thai newspapers and magazines to examine how agencies have adapted to implement IMC.
Employee influence on retail crowding effects the mediating role of responsiv...Hülya Bakırtaş
Specifically, the authors focus on one top-rated employee quality, responsiveness, and demonstrate its mediating role in tempering the undesirable aftereffects of crowding in the retail setting.
How Does Non-Paid Media Impact the Effectiveness of Paid Ads?Sarah Jackson
This study examines how non-paid (earned) media coverage impacts the effectiveness of paid advertising for AT&T and Hotels.com over a 9-month period. PR data including media clips analyzed for favorability and impressions were collected for each company. Advertising creative effectiveness scores from the Advertising Benchmark Index were also collected every 2 weeks for ads from each company. The goal is to see if major positive or negative events in earned media coverage correlate with changes in advertising creative scores, with the long term aim of developing a predictive model. Methodology details the PR and advertising data collection processes.
This document discusses relationship marketing and its impact on organizational performance. It explores the theoretical foundations of relationship marketing and examines how adopting this concept affects performance indicators. Relationship marketing focuses on creating and sustaining long-term relationships with customers through mutual cooperation rather than short-term transactions. When organizations implement relationship marketing successfully through internal marketing and keeping promises to customers, it can lead to improved customer loyalty, retention and positive word-of-mouth, ultimately improving organizational performance. Interactive marketing and developing trust, empathy and reciprocity in customer relationships are important aspects of relationship marketing discussed in the document.
This document summarizes a study that aims to replicate a previous study on relationship values in business relationships. The original study identified eight key relationship values from the customer perspective in manufacturing supplier relationships. This replication study seeks to verify the original findings in the toy industry in Turkey. It will interview toy retailers and purchasing managers to determine if the same relationship values are important, and if there are any cultural differences compared to the original study. The goals are to improve understanding of relationship values, provide implications for managers, and enhance the validity and reliability of the original study findings.
Gurumurthy Kalyanaram on Advertising Response Function in Marketing ScienceGurumurthy Kalyanaram
Dr. Gurumurthy Kalyanaram is a well-known professor and academic leader, and an experienced business consultant and advisorDr. Gurumurthy Kalyanaramh as lectured in various universities including The London School of Economics, The University of Texas at Dallas (UTD), Jiang Xi University of Finance and Frankfurt School of Finance and Management.
The relationship between customer value and pricing strategiesshampy kamboj
This study empirically analyzes the relationship between customer value and market prices in the washing machines market. The researchers:
1. Used conjoint analysis to assess the customer value of attributes for a sample of 129 washing machine models. This provided a measure of customer value for each model.
2. Compared the customer values from the conjoint analysis to the actual market prices of the 129 models using regression analysis.
3. Found limited alignment between price and customer value, with overpricing and underpricing of products being common. This suggests that value-based pricing is not fully established in practice in this market.
This document summarizes a study that examined factors influencing consumers' decisions to repeatedly purchase over-the-counter (OTC) pharmaceutical brands. The study used a survey of 118 OTC consumers to test hypotheses based on the theory of planned behavior. It found that direct experience with a brand, price tolerance, brand trust, and opinions of others are important in determining repeat purchase behavior. Specifically, past experience with a brand was found to influence perceptions of trustworthiness, price sensitivity, and purchase behavior, while price sensitivity affected attitudes and intentions to repurchase.
This document summarizes research on the effects of price promotions and advertisements on brand evaluations. It finds that price promotions can negatively impact brand evaluations, but the effects are complex and depend on factors like past promotional history, consumer expertise, and industry norms. Promotions are more likely to lower evaluations when a brand has not been promoted before, when consumers lack expertise, and when promotions are uncommon in that industry. The document also examines how consumers perceive advertised discounts, finding they often discount the discounts and perceive lower savings than advertised levels, with higher discounts discounted more.
This document discusses three types of preference vectors that can be derived from preference data: aggregate, segment-specific, and differential. Aggregate vectors represent overall preferences, segment-specific vectors represent preferences of particular customer segments, and differential vectors indicate areas of greatest difference in preferences between customer segments. These three vectors correspond to strategies of undifferentiated marketing, differentiated/concentrated marketing, and product-oriented selling, respectively. The document illustrates these concepts using data from a study of preferences for jazz musicians among radio listeners, analyzing preference patterns and deriving preference vectors to provide strategic insights for a jazz radio station's programming decisions.
A conceptual framework for customer value within a distribution systemfredrickaila
This document provides a conceptual framework for understanding customer value within a distribution system. It proposes that customer value in a distribution system can be conceptualized as the interactions among several key factors: customer service, order cycle time, inventory levels, warehouse locations, transportation methods, and customer complaints. The framework suggests linear relationships between these factors and hypothesizes that higher levels of customer service, shorter order cycle times, and fewer complaints will lead to higher perceived customer value. The conceptual model is intended to help managers design distribution strategies focused on maximizing customer value.
This document provides instructions for an assignment using system dynamics modeling to analyze competitive dynamics in a chosen organization and market. Students are asked to:
1) Choose an organization and develop stock and flow diagrams capturing important feedback processes driving demand.
2) Assess factors determining product attractiveness through graphs and determine which factors are most influential.
3) Evaluate the organization's current strategy based on its position relative to attractiveness factors and the industry feedback processes.
4) Write a 4-page report summarizing the analysis, strategic assessment, and recommendations for modifying strategy to be more robust and advantageous.
This study analyzed order fulfillment times for 1,000 products ordered from Amazon and other major online retailers to compare their performance. The results showed that on average, Amazon fulfilled orders in 1.92 days while other retailers took 4.81 days. Amazon delivered orders faster than competitors for 81% of products. Amazon had particularly strong fulfillment for books, delivering orders on average twice as fast as other retailers. The study concludes that Amazon's superior fulfillment infrastructure gives it a significant competitive advantage over retailers that have not invested similarly in online order fulfillment.
The document discusses a study that aimed to develop and empirically test a conceptual framework explaining the influence of the sales force on brand equity in business-to-business (B2B) contexts. The study developed a framework incorporating four key drivers of B2B brand equity identified in the literature: the salesperson's personality, the salesperson's behavior, product quality, and non-personal marketing communications. It then empirically tested hypotheses about the effects of these drivers on brand equity with a sample of 201 B2B firms in Germany. The results confirmed the high relevance of the sales force for building and maintaining strong B2B brands, with the salesperson's behavior being the most important driver, followed by their personality, product
Probabilistic selling is a marketing strategy that multi-item vendors provide to consumers, presenting
discounted options through acceptance of uncertain risks with random selections from sets of multiple distinct
items. However, past studies of this strategy assume a no return policy since returned items shift part of the
mentioned uncertain risk to the retailer. Because returns are a common business practice and an important
coordination tool in supply chains, this research identifies the impacts of a return policy on the efficacy of
probabilistic selling models
This chapter discusses different methods of measurement and scaling used in marketing research. It describes four primary scales of measurement - nominal, ordinal, interval, and ratio scales - and explains their characteristics. Comparative scaling techniques like paired comparisons, rank ordering, and constant sum scaling are presented, which involve direct comparisons between objects. Noncomparative scales that measure objects independently are also covered. The chapter provides examples to illustrate different scaling methods and their applications in marketing research.
Optimal pricing and delayed incentives in a heterogeneous consumer marketHari Rajagopalan
This paper develops a profit maximization model to determine the optimal price and rebate value for a product sold to heterogeneous consumers. The model divides consumers into three segments: rebate-independent, fully rebate-dependent, and partially rebate-dependent. It finds that three factors are critical in determining the effectiveness of rebates: 1) the reference value that represents the effort cost of redeeming a rebate, 2) the distribution of consumers among the three segments, and 3) the ratio of demand increase from a $1 rebate to a $1 price decrease, known as rebate attractiveness. The model is solved for linear and convex redemption rates and shows that higher reference values and more partially rebate-dependent consumers
Material in slides 2 14 of this overview adapted from prinADDY50
The document discusses marketing channels and pricing strategies. It covers topics like typical marketing channels including direct and indirect channels. It also discusses functions of channel partners like promoting brands and distributing products. The document then talks about factors that affect pricing decisions like costs and competitors' prices. It provides examples of pricing strategies such as introductory, cost-plus, and promotional pricing.
C3 impact of target marketing on advertising attitudes[1]SNSPA, Bucharest
This study examines the impact of target marketing on both the intended target audience and unintended "nontarget" audience. Three experiments show that target marketing can have unfavorable effects on nondistinctive groups in the nontarget market, such as Caucasian or heterosexual individuals, whereas distinctive groups in the target market, such as African American or homosexual individuals, respond more favorably. Experiment 2 demonstrates that feelings of similarity or targetedness influence these effects differently for distinctive versus nondistinctive groups. Experiment 3 shows these feelings are associated with the psychological processes of identification and internalization. The findings have implications for understanding the effects of distinctiveness in persuasion and potential social impacts of target marketing.
This document summarizes sales promotion models. It begins by providing background on the growth of sales promotion modeling in both academia and industry. Descriptive models measure the effects of promotions, while prescriptive models make recommendations. The document reviews key phenomena and models for coupons, trade promotions, and retailer promotions. For coupons, redemption rates and incremental sales are critical to model. Regression is commonly used to predict redemption rates based on factors like distribution method, brand loyalty, and previous promotions. Descriptive models are needed to understand promotional effects before building prescriptive models that optimize profitability.
The document summarizes the definition and evolution of integrated marketing communications (IMC) and the traditional roles of advertising agencies. It provides an overview of how IMC has been defined by various academics and organizations. Key aspects of IMC definitions include coordinating marketing messages, building customer relationships, and maximizing impact on brands. The traditional roles of agencies focused on separate functions like creative, media, and research, rather than integrated strategies. The document then discusses the methodology for a content analysis of Thai newspapers and magazines to examine how agencies have adapted to implement IMC.
Employee influence on retail crowding effects the mediating role of responsiv...Hülya Bakırtaş
Specifically, the authors focus on one top-rated employee quality, responsiveness, and demonstrate its mediating role in tempering the undesirable aftereffects of crowding in the retail setting.
How Does Non-Paid Media Impact the Effectiveness of Paid Ads?Sarah Jackson
This study examines how non-paid (earned) media coverage impacts the effectiveness of paid advertising for AT&T and Hotels.com over a 9-month period. PR data including media clips analyzed for favorability and impressions were collected for each company. Advertising creative effectiveness scores from the Advertising Benchmark Index were also collected every 2 weeks for ads from each company. The goal is to see if major positive or negative events in earned media coverage correlate with changes in advertising creative scores, with the long term aim of developing a predictive model. Methodology details the PR and advertising data collection processes.
Does Current Advertising Cause Future Sales?Trieu Nguyen
findings from a large-scale field experiment that allows us to study whether
there is a causal relationship between current advertising and future sales. The
experimental design overcomes limitations that have affected previous investigations of
this issue. We find that current advertising does affect future sales but the sign of the
effect varies depending on the customers targeted. For the firm’s best customers the
long-run effect of increases in current advertising is actually negative, while for other
customers the effect is positive. We argue that these outcomes reflect two competing
effects: brand-switching and inter-temporal substitution. Furthermore, our data suggest a way to distinguish between the informative and persuasive roles of advertising, providing insight into the mechanism by which advertising differentially affects various customer subsets
This document discusses the debate between the strong and weak theories of advertising. The strong theory argues that advertising can directly change consumer attitudes and behaviors, leading to increased sales. The weak theory argues that advertising mainly reinforces existing brand perceptions rather than directly changing attitudes. The document evaluates several models from each school and argues that neither fully captures how advertising works. It concludes that advertising's role goes beyond just generating sales, and its effectiveness depends on the specific communication objectives.
Advertising messages are everywhere. There are advertisements on radio,
television, billboards, newspapers, magazines, the Internet, matchbook covers, gas
pumps, shopping carts, clothing, and on. Advertising researchers want to answer
questions such as should a certain product be packaged in blue or red? Is
Cosmopolitan a better advertising buy than Vogue? Advertising research does not
involve any special techniques; the methods discussed earlier— laboratory, survey,
field research, focus groups, and content analysis—are in common use.
Advertising
Generally we can say that Advertising is a marketing communication and non-
personal message to promote or sell a product, service or idea.
Advertising is a means of communication with the users of a product or service.
https://economictimes.indiatimes.com/definition/advertising
Advertising research
Advertising research is a specialized form of marketing research conducted to
improve the efficiency of advertising.
Advertising research is the systematic gathering and analysis of information to help
develop or evaluate advertising strategies, ads and commercials, and media
campaigns.
https://www.slideshare.net/PranavKumarOjha/advertising-research-13466787
So research in advertising is applied research, which attempts to solve a specific
problem and is not concerned with theorizing or generalizing to other situations.
Areas in advertising research
There are three functional research areas in advertising these are
1. Copy research
2. Media research and
This document provides a literature review of a 1997 paper by Ambler and Styles on brand extension decision making processes. It summarizes the Ambler and Styles paper, noting its research design using 11 case studies and resulting propositions. It then evaluates the limitations of the Ambler and Styles paper, such as its small sample size and focus only on FMCG brands. Finally, the document reviews five branding papers and identifies similarities and differences in their findings regarding key factors for successful brand extensions.
This document summarizes a research paper that examined the influence of advertising skepticism on brand extension evaluations. The researchers hypothesized that consumers with high advertising skepticism would evaluate moderately similar brand extensions less favorably than consumers with low skepticism. Two studies generally supported this, finding less favorable evaluations and more parent brand dilution among highly skeptical consumers for moderately similar but not highly similar or dissimilar extensions. The research contributes to understanding how individual differences like skepticism influence responses to brand extensions. Marketers should emphasize links between parent brands and extensions to help skeptical consumers see similarities.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Gurumurthy Kalyanaram on Endogenous Modeling of DTCA in IJHPM. Dr. Gurumurthy Kalyanaramh as lectured in various universities including The London School of Economics, The University of Texas at Dallas (UTD), Jiang Xi University of Finance and Frankfurt School of Finance and Management.
Thomson Financial analyzed 75 recent instances of shareholder activism and found mixed results regarding the impact on stock price. Stocks targeted by activists showed higher returns after the activism in both short and long-term, but the results were not always statistically significant. Certain sectors like consumer discretionary were more frequent targets. Activists achieved at least one of their demands 45% of the time, with the highest success rate of nearly 80% for demands to remove the CEO. Stocks of targeted companies outperformed a control group after activism, suggesting shareholder monitoring leads to positive changes. However, the prominence rather than just substance of activism may influence stock prices.
The document discusses publishing companies' online strategies and the match between their strategic objectives and available resources/capabilities. It finds that while publishers aim to support their brands and get closer to customers with online services, their long-term objectives of growth and profitability are difficult to achieve given their limited resources. Publishers lack technical resources and skills for developing online applications and targeting new customer groups. Their "pea shooter" capabilities are insufficient for taking down the "profitability bear". The study identifies new capability areas needed, such as technical coordination and online advertising/selling skills.
This document proposes a framework for advertising communication models consisting of four fundamental models with eight variations. The framework includes six steps: exposure to ads, processing ad elements, communication effects, target actions, sales/market share, and profit. It identifies key components of models including target audiences, decision-makers, communication objectives (brand awareness, attitude, etc.), and tactics. The goal is to help managers set objectives and evaluate advertising more validly.
This document provides an abstract and table of contents for a research paper that examines the impact of communication on mergers and acquisitions in the life sciences industry, using the Pfizer-Wyeth acquisition as a case study. The abstract outlines that the paper aims to understand how strategic communication can impact M&A business outcomes and reputation, and how it can emphasize clinical value. It also provides an overview of the paper's theoretical framework and methodology. The table of contents provides further detail on the structure and content of each chapter.
This chapter reviews literature related to marketing practices. It discusses several studies conducted between 1944-2004 on topics such as the marketing practices of food manufacturers, consumers' attitudes towards business policies and practices, the impact of marketing representatives on prescription patterns, and factors influencing pharmaceutical pricing strategies. The literature review aims to understand existing research and identify gaps to inform the current study.
Return On Involvement - A Consumer Perspective On AdvertisingKim Lykke Andersen
This document provides an abstract for a thesis that explores how consumers' perceptions of creative advertising affect their motivation for brand involvement. The study uses qualitative focus groups to understand how different types of advertising communication elements influence brand involvement. The findings suggest that creative ads that relate to consumers' self-identity, relationships with others, and social causes are most effective at generating brand involvement. Future advertising should consider how brand messages align with these aspects of consumers' lives.
DOI 10.2501JAR-52-3-339-345 September 2012 JOURNAL OF ADVERT.docxjacksnathalie
DOI: 10.2501/JAR-52-3-339-345 September 2012 JOURNAL OF ADVERTISING RESEARCH 339
INTRODUCTION
The current research program quantifies the syn-
ergy of the three strongest drivers of positive
brand-purchase change:
pricing,
in-store display, and
television advertising.
The study focused on heavily advertised consumer
packaged goods (CPG) brands that averaged
upward of $20 million in television advertising
within the categories of toothpaste, yogurt, and
cereal.
The report summarizes the findings of the first
six case studies across six brands with varied mixes
of television, price promotion, featured items in a
retail circular, and in-store display. It provides
marketers with examples of findings from this
single-source, household-level methodology.
Two critical findings:
Within the media industry, it is commonly
believed that television and a temporary price-
reduction (TPR) promotion should not be used
at the same time because television reduces the
impact of price reduction. The study has found
that to be an inaccurate assumption. For the
six case studies, approximately 50 percent of
all households exposed to television were also
affected by the TPR program and exhibited
higher sales increase than the other half reached
only by television.
Simultaneously using all three marketing tac-
tics—pricing, in-store display, and television
advertising—maximizes the positive impact
Exploding the Legend of
TV Advertising and Price Promotions
The Proper Mix of Price, In-Store, and TV
for Maximum Short- and Long-Term ROI
BILL HARVEY
TRA, Inc.
[email protected]
TERESE HERBIG
TRA, Inc.
[email protected]
MATTHEW KEYLOCK
dunnhumbyUSA
[email protected]
us.dunnhumby.com
RITESH AGGARWAL
dunnhumbyUSA
[email protected]
us.dunnhumby.com
NINA LERNER
dunnhumbyUSA
Nina [email protected]
us.dunnhumby.com
The advertising and marketing communities traditionally have understood television
advertising effectiveness and its relationship to in-store marketing tactics through small-
market research or marketing-mix modeling. Although these studies have improved the
quality of advertising-effectiveness research, they have done little to improve the tools
marketers need to translate those insights on a larger scale and optimize their marketing
those tools and give marketers a more granular understanding of brand-purchase behavior
and the impact of multiple marketing levers on in-store brand sales. This paper leverages
the anonymous household-level purchase behavior data from 60 million households
across the United States and the second-by-second measurement of television-viewing
habits from more than 2 million set-top box households, and the current study applies
actual (non-modeled) single-source, household-level data to demonstrate a methodology
for optimizing the mix of television advertising and in-store marketing.
340 JOURNAL OF ADVERTISING RESEARCH September 2012
EXPLODING THE LEGEND OF TV ADVERTISING AND PR ...
This document summarizes a research article that examined consumer vulnerability to perceived product similarity. The study had three main goals: 1) Test the validity of a perceived product similarity scale developed in Germany on UK consumers; 2) Examine how perceived product similarity relates to brand loyalty and word of mouth; 3) Identify if segments of consumers with different levels of perceived product similarity exist. The researchers hypothesized that as perceived product similarity increases, brand loyalty decreases but word of mouth increases or decreases depending on how consumers attribute the cause of their perceived similarity. The study aimed to contribute to understanding consumer cognitive vulnerability.
When is social marketing notsocial marketingGerard Hast.docxphilipnelson29183
When is social marketing not
social marketing?
Gerard Hastings
Institute for Social Marketing, University of Stirling, Stirling, UK and
The Open University, Milton Keynes, UK, and
Kathryn Angus
Institute for Social Marketing, University of Stirling, Stirling, UK
Abstract
Purpose – The paper aims to discuss the thorny issues of industry-funded social marketing
campaigns. Can the tobacco industry be trusted to educate our children about the dangers of smoking?
Is a brewer the best source of health promotion? The paper argues for transparency and critical appraisal.
Design/methodology/approach – The paper looks at the issues of tobacco and alcohol in more
detail, emphasises the need for caution and suggests guidelines for future practice.
Findings – The fiduciary duty of the corporation means that all its efforts – including any social
marketing campaigns or corporate social responsibility – must be focused first and foremost on the
success of the business and the enhancement of shareholder value; any wider public health benefits will
inevitably be subjugated to this core purpose. And there is good evidence to show that the principal
beneficiaries of apparently public-spirited campaigns run by tobacco and alcohol companies are the
sponsors. In the hands of a corporation, then, social marketing will always transmute into commercial
marketing.
Practical implications – We should then proceed with our eyes wide open, alert to the danger of
counterproductive outcomes, armed with independent evaluation and in the full knowledge that
wherever industry-funded efforts to educate the public replace those run by objective third parties,
harm will be done.
Originality/value – The paper, concerned with industry-sponsored social marketing, broadens the
discussion beyond communications. It shows that it is necessary to consider the whole marketing mix,
not simply advertising, when discussing social marketing.
Keywords Social marketing, Tobacco, Corporate social responsibility, Alcoholic drinks, Advertising,
Public health
Paper type Viewpoint
Introduction
Social marketing campaigns sponsored by commercial operators, sometimes referred
to as “social responsibility” campaigns, seem like a self-evidently good idea. Why would
we not want companies that produce hazardous – or potentially hazardous – products
to get involved in telling their customers how they can reduce the risks? It adds resource
to the public health effort and presents an enlightened and socially responsible business
model.
The reality is more contentious. A look at both tobacco and alcohol reveals why.
In the case of tobacco, the principal concern is that responsibility campaigns do more
to boost the standing of their commercial sponsors than they do to benefit public health.
This is especially unfortunate given that tobacco is unremittingly harmful and the
ultimate aim of public health is, therefore, to eliminate its use (BMA, 2008; HELP, 2008).
There is good research evidence to c.
The document proposes a general structure for constructing models of how advertising works. It identifies four fundamental advertising communication models based on the communication objectives of brand awareness and brand attitude. The models help set complete advertising objectives, assist creative specialists, and increase validity of advertising pre-tests. The document outlines the components and steps of an advertising communication model, including target audience, decision-maker, communication effects, and objectives. It differentiates the models based on whether the objective is brand recall or brand recognition for brand awareness, and discusses tactics for each.
This document contains extracts from academic writing and commercial writing. The academic extracts discuss topics like knowledge transfers, strategic alliances, and palliative care research. They use complex language and cite multiple references. The commercial extract proposes an idea to convert taxis to electric vehicles. It uses simpler language to describe business benefits and next steps. Word choice, length, specificity, and citation of references can help distinguish academic from commercial writing.
The document summarizes a presentation on how market research is changing due to the rise of data science. It discusses how both research suppliers and users are adapting, including traditional players facing threats from tech-enabled competitors, and users struggling to show value. The presentation covers how the ecosystem is changing as data sources multiply and privacy concerns grow. It then discusses two case studies, one using text and image mining on social media to understand furniture brand perceptions, and another linking survey data to multiple external sources to better classify consumers. The presentation argues that market researchers must embrace new skills to stay relevant, including data science and technical tools.
Would you let a machine manage your retirement savings? What about setting up a direct debit mortgage payment? Technology is reshaping the financial sector delivering services faster, smarter and cheaper than ever. However, in a sector where consumer trust is hard won and closely linked to human contact, how can brands convince customers that AI is the future?
New research combining traditional qualitative with digital analytics considers the tussle between functionality and emotion in this space and explores consumers’ feelings about AI services. This session will look across a spectrum of services from chat bots to robo-advice & beyond.
This document provides a semantic analysis of political meanings and narratives around Jeremy Corbyn and Theresa May based on data mining of online conversations. It maps out four main narratives - Managerial Competence, Human Progress, National Preservation, and Authentic Decency. It analyzes how each politician is discussed within these narratives and identifies key drivers of conversations. Volumes of conversations about each politician are also compared.
Can Chairs talk - Using a combination of Image Mining and Text Analytics to decipher relative strength of fast growing Italian designer furniture brand vis-a-vis the competition and also to strategize its future brand positioning. Presented at ESOMAR World Congress 2017 at Amsterdam and won Best Paper at World Congress 2017. Coauthored by Chiara Davanzo Zamarian.
Shorter ESOMAR version of Six People Six Lives One Hope- Listening to Employees
Won Best paper in Below 30 category at ESOMAR World Congress 2011-Amsterdam (Young Researcher of Year 2011)
This story revolves around a professor (fictitious) who attempts to solve everyday professional problems to improve job satisfaction thereby reducing future attrition (a key concern today). However job satisfaction as discovered, is also impacted by overall happiness in life; a large part of which is governed by several factors beyond the office cubicles. But this does not mean that Companies cannot influence this aspect; professional life and policies adopted by HR departments can impact some of these factors to improve overall happiness; thereby increasing both job satisfaction as well as employee retention.
Full version of Six People Six Lives One Hope- Listening to Employees
Won Best paper in Below 30 category at ESOMAR World Congress 2011-Amsterdam (Young Researcher of Year 2011)
This story revolves around a professor (fictitious) who attempts to solve everyday professional problems to improve job satisfaction thereby reducing future attrition (a key concern today). However job satisfaction as discovered, is also impacted by overall happiness in life; a large part of which is governed by several factors beyond the office cubicles. But this does not mean that Companies cannot influence this aspect; professional life and policies adopted by HR departments can impact some of these factors to improve overall happiness; thereby increasing both job satisfaction as well as employee retention.
Shortened ESOMAR version- http://tinyurl.com/omodac7
1. How Well Does Advertising Work?
Generalizations From A Meta-Analysis of Brand Advertising Elasticity
RAJ SETHURAMAN, GERARD J. TELLIS, AND RICHARD BRIESCH
The authors thank Don Lehmann, Mike Hanssens, the participants at the Advertising Generalization
conference at the Wharton School, University of Pennsylvania and the Marketing Science conference at
Ann Arbor. The authors also thank Marc Fischer for providing part of the data, Anocha Aribarg for
clarifications on the elasticities, Ranga Venkatesan and Prerit Souda for assistance in data collection and
data analysis. This study benefitted from a grant by Don Murray to the USC Marshall Center for Global
Innovation.
2. 1
How Well Does Advertising Work?
Generalizations From A Meta-Analysis of Brand Advertising Elasticity
ABSTRACT
This study conducts a meta-analysis of 751 short-term and 402 long-term direct-to-
consumer brand advertising elasticities estimated in 56 studies published between 1960 and
2008. The study finds several new empirical generalizations about advertising elasticity. The
most important generalizations are: The average short-term advertising elasticity is .12, which is
substantially lower than the prior meta-analytic mean of .22 (Assmus, Farley, and Lehmann
1984); there has been a decline in the advertising elasticity over time; and advertising elasticity
is higher a) for durable goods than nondurable goods, b) in the early stage of the life cycle than
in the mature stage, c) for yearly data than for quarterly data, and d) when advertising is
measured in Gross Rating Points than in monetary terms. The mean long-term advertising
elasticity is .24, which is much lower than the implied mean in the prior meta-analysis (.41).
Many of the results for short-term elasticity hold for long-term elasticity, with some notable
exceptions. The authors discuss the implications of these findings.
Key Words: Advertising Elasticity, Meta-analysis, Empirical generalization, Promotion,
Marketing mix
3. 1
Advertising is one of the most important elements of the marketing mix. Controversy
rages over whether firms are getting adequate returns on their advertising expenditures (Aaker
and Carman 1982, Tellis 2004). One key element in this controversy is how effective
advertising is in generating sales. The effectiveness of advertising is often measured in terms of
advertising elasticity, i.e., the percentage increase in sales or market share for a one percent
increase in advertising. Obtaining generalizable estimates of advertising elasticity and
identifying factors that influence advertising elasticity can further our understanding of the
effectiveness of advertising.
Assmus, Farley, and Lehmann (1984) provide the first empirical generalizations on
advertising elasticity. In particular, these authors met analyze 128 estimates of advertising
elasticity from 16 studies published between 1962 and 1981 and provide useful generalizations
on the patterns of advertising elasticity. Over 25 years have passed since that publication. This
period (1984-2008) has witnessed significant changes on many fronts that may have an impact
on the measurement and effectiveness of advertising. First, the marketing environment has
changed due to greater competition, globalization, the advent of the Internet, and the ability of
the consumer to opt out of TV commercials through devices such as TiVo. Second, the data and
methods for estimating advertising elasticity are increasing in sophistication with the use of
disaggregate scanner data and the application of New Empirical Industrial Organization (NEIO)
econometric models. It would therefore appear prudent to update the empirical generalizations
on advertising elasticity by including data from studies published since 1981.
This study conducts a meta-analysis of 751 short-term brand-level direct-to-consumer
advertising elasticities, as well as 402 long-term estimates of advertising elasticities, from 56
studies published between 1960 and 2008. Our study disconfirms a few findings from Assmus,
4. 2
Farley, and Lehmann (1984), validates some of the earlier findings, and uncovers several new
empirical generalizations and insights.
In this regard, this research is similar in spirit to other follow-up meta-analytic studies in
recent times. For example, Bijmolt, van Heerde, and Pieters (2005) update the meta-analysis of
price elasticity conducted earlier by Tellis (1988). Hu, Lodish, and Krieger (2007) provide a
partial update on the meta-analytic study of Lodish et al. (1995) related to TV advertising
experiments. Our study can also be viewed as a meta-analytic complement to the broad review
of advertising literature by Vakratsas and Ambler (1999). They develop a taxonomy, review 250
studies, and provide insights into how advertising works. Our study performs a meta-analysis of
econometric estimates of advertising elasticity and provides insights into whether advertising
works, the magnitude of the effect, and the factors which influence elasticity. In the process, the
study adds to Hanssens’ (2009) list of empirical generalizations about marketing’s impact.
Our study complements the recent article by Fischer and Albers (2010). Both studies
attempt to provide insights into the effect of marketing mix on sales. However, the foci of the
two studies are quite different. Fischer and Albers provide an excellent analysis of the effect of
marketing efforts (detailing, journal advertising, and consumer advertising) on primary demand
(category expansion) in pharmaceutical product categories. Our analysis focuses on the effect of
consumer advertising on selective demand (competitive brand sales) across a wide range of
consumer products, including pharmaceuticals.
Consistent with the prior meta-analysis of Assmus, Farley, and Lehmann (1984), we find
that advertising elasticity is higher in Europe than in the United States and higher when lagged
sales is omitted from the model. However, the contribution of this research lies in the
differences in results obtained and the additional insights revealed by our meta-analysis. First,
the mean short-term advertising elasticity across the entire publication period (1960-2008) is .12,
5. 3
which is about half the mean advertising elasticity in the Assmus, Farley, and Lehmann meta-
analysis. Relatedly, we find that advertising elasticity has declined over time. Second, we find
strong product type and product life cycle effects that the Assmus, Farley, and Lehmann study
does not detect, perhaps due to lack of sufficient observations. Third, we are able to include
several variables that have become important in recent times (such as recessionary periods and
omission of endogeneity) and obtain new insights about their role. For example, we find that
contrary to general belief, short-term advertising elasticity is not lower in recession than in
expansion; if anything, advertising elasticity is equal or higher during recession than in
expansion. Our study also discusses some insights about interaction effects and long-term
elasticity.
The remainder of the paper is organized as follows: The second section describes the
data. The third section describes the meta-analysis procedure. The fourth section presents the
empirical findings. The fifth section discusses the results and their implications. The final
section summarizes the results in the form of empirical generalizations and provides some
limitations and future research directions.
DATA
This section describes the compilation of the database used in the meta-analysis. The
data consists of observations on advertising elasticity (dependent variable) and the potential
influencing factors of advertising elasticity (independent variables).
Advertising Elasticity
For this meta-analysis, we select those studies that provide estimates of brand-level,
short- or long-term consumer advertising elasticity, from econometric models using market data.
Thus, our meta-analysis excludes (i) category advertising effects; (ii) effects based on
6. 4
experimental or other non-econometric designs; and (iii) business to business (B2B) advertising.
We explain each of these choices.
First, category-level advertising elasticity measures the increase in category sales
(primary demand) for one percent change in total category advertising. These effects have been
generally of interest to economists and public policy makers who investigate whether advertising
expands category demand in products such as milk, alcohol, and cigarettes (e.g., Gallet 2007).
Fischer and Albers (2010) provide a recent comprehensive analysis of the primary demand
effects of marketing efforts in the pharmaceutical industry. Our perspective is that of the brand
managers, who are interested in the extent to which advertising of their brands impacts their own
brand’s sales (selective demand).
Second, following the scope of the prior meta-analysis by Assmus, Farley, and Lehmann
(1984), we restrict our analysis to econometric estimates. Lodish and others conduct numerous
TV advertising experiments and meta-analyze those results (Hu, Lodish, and Krieger 2007).
However, their focus is mainly on whether advertising produces a significant impact on sales in
controlled experiments and not in natural market scenarios, which is the purpose of our study.
Third, consistent with the prior Assmus, Farley, and Lehmann study, we focus on
consumer advertising only. Studies that provide advertising elasticity in the B2B context are
very few and generally pertain to journal advertising to doctors (B2B in the pharmaceutical
industry). Fischer and Albers (2010) do a thorough job of analyzing this industry.
We adopt the following procedure for compiling the studies. We start our literature
review with Assmus, Farley, and Lehmann (1984) as the base. We then use the Social Science
Citation Index to identify 132 publications that reference the 1984 meta-analysis. We next use
keyword searches (e.g., advertising elasticity, advertising response, sales response) in online
search engines such as Google Scholar, ABI/Inform, and Lexis-Nexis to identify articles that
7. 5
discuss the subject area. We also review the reference lists in all of the above studies. We
consider those studies that provide econometric estimates of advertising elasticity. While most
studies directly report advertising elasticity, in some cases we have had to compute the elasticity
based on available data or with inputs from the studies’ authors. The process yields 751 short-
term elasticities from 56 publications. Details of these studies are available in the Web
Appendix (Table A1).
Advertising can impact sales both in the short term (current period) and in the long term
(current and future periods). We define long-term or long-run advertising elasticity as the
percent change in a brand’s current and future period sales for one percent change in the brand’s
current advertising. Some studies directly provide estimates of long-term ad elasticity. Others
provide estimates of short-term elasticity and carryover coefficient (coefficient of the lagged
dependent variable) from the Koyck model. Long-run elasticity is [short-term ad elasticity/(1-
carryover coefficient)] (Clarke 1976). A few researchers measure advertising as ad stock,
defined as a weighted combination of current and past advertising based on an exponential
smoothing coefficient. In this case, the estimate of advertising elasticity is the long-term
elasticity. The short-term elasticity is [long-term elasticity * (1 – smoothing coefficient) ]
(Danaher, Bonfrer, and Dhar 2008). We obtain 402 long-term advertising elasticities from 38
studies listed in the Web Appendix (Table A1).
Influencing Factors
In addition to advertising elasticity, we collected data on 22 variables that can potentially
influence elasticity and classified them into the six factors below.
1. Time and Recession Factors: Median year of data and duration of recession during the
estimation period.
2. Product and Geographic Factors: Product type, product life cycle, and geographic area.
3. Data Characteristics: Temporal interval, data aggregation, dependent measure,
advertising measure, and advertising type.
8. 6
4. Omitted Variables: Omission of lag dependent variable, lag advertising, lag price, price,
quality, promotion, and distribution.
5. Model Characteristics: Functional form, estimation method, incorporating endogeneity,
and incorporating heterogeneity.
6. Other Characteristics: Published vs. unpublished work
Many of these variables correspond to those in the original meta-analysis on advertising
elasticity by Assmus, Farley, and Lehmann (1984). However, availability of new data permits us
to investigate several new variables, such as the time trend, presence of a recession, additional
product types (service goods and pharmaceuticals), additional continents (Asia and Australia),
and additional method factors (incorporation of endogeneity and heterogeneity).
Table 1 (Columns 3, 4) provides the levels of the independent variables and the sign of
the expected relationship with advertising elasticity. Detailed description of the expected
relationship and the operationalizations of the variables are in Table 2.
PROCEDURE
This section describes the univariate analysis, main meta-analytic model, alternate meta-
analytic model for robustness, test of additional variables for insights, and the meta-analysis
model for analyzing long-term advertising elasticity.
Univariate Analysis
First, we perform univariate analysis to obtain an estimate of the mean short-term
advertising elasticity, which we then compare with the value in Assmus, Farley, and Lehmann
(1984). We also analyze the median and distribution of advertising elasticity.
Meta-Analytic Model for Short-Term Elasticity
The purpose of this meta-analysis is to identify the potential influencing factors of
advertising elasticity. Earlier meta-analytic studies (e.g., Assmus, Farley, and Lehmann 1984
and Tellis 1988) use Ordinary Least Squares (OLS) regression of the form:
(1) sjsjsj XA εβ +=
9. 7
where Asj is the jth
advertising elasticity from sth
study, Xsj are characteristics of the market, study
design, and model that influence the elasticity (listed in Table 1), β’s are the meta-analytic
parameters of interest, and esj are the error terms, initially assumed to be independently and
identically distributed N(0,s2
). To account for within-study error correlations, Bijmolt and
Pieters (2001) point out that unique study-specific characteristics not captured in the independent
variables would appear in the error structure. This would result in non-zero correlations leading
to non-zero error covariance (within-study), violating the assumptions of ordinary least squares
regression. They, therefore, suggest the use of a hierarchical linear model (HLM) estimated with
iterative generalized least squares (IGLS) to allow for within-study, block non-zero variance-
covariance matrix. Specifically, they suggest a model of the form:
(2) sjssjsj XA εζβ ++=
where zs is the unobserved study-specific effect and is assumed to be distributed with mean zero
and standard deviation sz
. Following Bijmolt, van Heerde, and Pieters (2005), we use Model (2)
in our analysis for identifying potential influencing factors.
Alternate Meta-Analytic Models to Test Robustness
We discuss many issues regarding the estimation of Model (2). First, the advertising
elasticities themselves are not true parameters, but are estimated with error. This uncertainty
surrounding the true advertising elasticity can be accounted for using the following procedure:
(i) compile the estimated advertising elasticity Asj, the jth
advertising elasticity from sth
study
along with its standard error Bsj; (ii) assume the true parameters lie in the normal distribution
N(Asj, Bsj); (iii) draw A˜sj observation for each s, j from the corresponding normal distribution.;
(iv) estimate Model 2 with A˜sj instead of Asj to get βk, where βk is the vector of regression
parameters from the kth
iteration. Repeat steps (i) to (iv) for 500 iterations and average βk across
all 500 iterations to get an average estimate that takes into account the uncertainty surrounding
10. 8
the advertising elasticity.1
A second major issue is collinearity. A number of method variables are likely to be
correlated. We assess the extent of multicollinearity through traditional measures such as
bivariate correlation, variance inflation factor (VIF), condition index, and proportion of variance
explained. However, since most of the method factors are discrete dummy variables, correlation
measures often tend to be lower. Therefore, we use cross-tab analysis of pairs of variables and
the corresponding chi-square measure to detect deviation from independence of two discrete
variables. Based on these multiple measures, we identify pairs of variables with potential
problems of collinearity. We exclude one of those variables from Model (2) and test for
robustness by inspecting the significance of the other included variable.
Standard errors are available only for 437 Asj observations, so we
perform this analysis for only this subset of observations.
Test of Additional Variables
We carry out several analyses to gain additional insights. First, we explore several
interaction effects, which are listed below with a brief explanation for their choice: 2
(i) Recession x product type: A recession may affect advertising elasticity of high-priced
durable goods more than low-priced food products.
(ii) Product life cycle x product type: Advertising might be more important in the early stage
of durable products because they are less easily known by trial.
(iii)Product life cycle x dependent measure: For growth products, advertising may have
greater influence on sales than share due to higher potential for category sales growth
while for mature products advertising may influence market share more than absolute
sales since firms are competing for a share of fixed total market.
(iv)Data interval x omission of lagged sales: When data is more aggregate (yearly), omission
of lagged sales (carryover effect) may not affect advertising elasticity as much as when
data are less aggregate (weekly).
(v) Time period x nature of dependent variable:.
1
We thank the Area Editor for suggesting this method to account for uncertainty in elasticity estimates.
2
Numerous interaction effects are possible. Incorporating many interactions would contribute to collinearity and
compromise the stability of the model. We included those interactions for which we either had some priors based on
theory or intuition (e.g., product life cycle x dependent measure), or which were otherwise of managerial interest
(e.g., recession x product type).
11. 9
Second, we investigate whether or not some brand characteristics influence advertising
elasticity. We collect data on brand market share, brand advertising share, and relative price for
212 of 751 observations. However, Sethuraman, Srinivasan, and Kim (1999) state that the
elasticity measure is related to brand share and advertising share by definition. For example, in
the linear model, (absolute) advertising effect is measured as d(market share)/d(advertising). To
convert into (percent) elasticity measure, we multiply the effect by mean brand advertising and
divide by brand market share. Because market share is in the denominator and advertising is in
the numerator, advertising elasticity, by definition, tends to be larger for brands with low market
share and high advertising share. Therefore, we only test whether advertising elasticity is higher
for high-priced brands by re-estimating Model (2) with brand relative price included.
Third, we use logistic regression to assess what factors influence the statistical
significance of short-term advertising elasticity. Information on the statistical significance of
advertising elasticity is available for 437 of 751 observations. The elasticity is significantly
greater than zero (p < .05, one tailed test) in 57% of the observations. We estimate the following
logit model to identify factors influencing the significance of advertising elasticity.
exp (Vsj)
(3) P(Asj is significantly > 0) = -------------------, where sjsjsj
XV εγ +=
1 + exp (Vsj)
Xsj is the set of influencing variables listed in Table 1 and γ is the coefficient vector measuring
the influence of the variable on the significance of advertising elasticity.
Analysis of Long-Term Advertising Elasticity
As with short-term elasticity, we first perform univariate analysis to obtain an estimate of
the mean advertising elasticity and compare with the value in Assmus, Farley, and Lehmann
(1984). We also obtain insights on the median and distribution of long-term advertising
12. 10
elasticity. Then, we estimate Model (2) to identify factors that influence long-term elasticity. We
do not conduct robustness checks, due to lack of sufficient data and because standard errors are
not available for long-term elasticity.
RESULTS
First, we present the results on short-term advertising elasticity in the following order:
univariate analysis, overview of regression results, and results for individual influencing factors.
Then, we present the results on long-term advertising elasticity.
Univariate Analysis
Figure 1 presents the distribution of short-run advertising elasticity. There are 751short-
run brand-level advertising elasticities, with magnitudes ranging from -.35 to 1.80. Over 40% of
the elasticities are between 0 and 0.05. About 7% of advertising elasticities are negative, though
we generally expect advertising elasticity to be positive. In the spirit of meta-analysis, we retain
the negative elasticities because the meta-analytic model will reveal whether any method or
environmental variable is responsible for such negative estimates.
The mean short-term advertising elasticity across the 751 observations is .12, which is
substantially lower than the mean of .22 from 128 observations in Assmus, Farley, and Lehmann
(1984). The difference between the two results is attributable to: (i) reduction in advertising
elasticities over time; (ii) inclusion of 32 product-level elasticities in Assmus et al., which are
generally higher than the brand-level elasticities; and (iii) non-inclusion of estimates from
Lambin (1976) in the Assmus study, which are generally below the prior mean of .22. Our
estimate is closer to the mean advertising elasticity of .104 of Hu, Lodish, and Krieger (2007,
Table 1) from 210 real-world TV advertising tests. Our estimate is also similar to Sethuraman
and Tellis (1991), who find that the mean brand-level advertising elasticity across a wide range
of categories is .11.
13. 11
The median short-run advertising elasticity is even lower at .05, but closer to the
uncorrected mean short-run elasticity of .04 in the recent comprehensive study on
pharmaceuticals by Fischer and Albers (2010, Table W1). Primary authors report the standard
errors (or t-values) of the estimates in 437 of the 751 observations. Advertising elasticities are
significantly greater than zero at the 95% confidence level in 57% of the cases.
Overview of Meta-Analytic Results
Table 1 (Column 5) presents the results for the main meta-analytic model (2) for short-
run ad elasticity. The model explains 37% of the variance in advertising elasticity, which is
comparable to the prior meta-analysis of Assmus, Farley, and Lehmann (36%). Coefficients
corresponding to twelve of the 22 independent variables are statistically significant at least at
p < .10. They are: year of data, product type, product life cycle, region, temporal interval, level
of data aggregation, measure of advertising, advertising type, omission of lag sales, omission of
distribution, functional form, and omission of endogeneity.
We account for uncertainty in advertising elasticity by compiling 437 observations in
which information on the extent of uncertainty, as measured by the standard error, is available.
We then draw 500 random datasets using the method described in the procedure section, estimate
Model (2), and compute the average of the estimates corresponding to each variable. These
average estimates are in the Web Appendix (Table A2). All significant variables in the main
regression model are also significant in this model, with the exception of the advertising
measure. In addition, recession is positive and significant in this new model. Other significant
variables are omission of lag price, quality, promotion, and estimation method.
We assess the extent of collinearity and find that the problem of collinearity exists but
does not compromise the main results. All variance inflation factors are less than five, except
one corresponding to estimation method, which is ten. All condition indices are less than 20. In
14. 12
the principal components analysis, no two variables explain more than 50% of the variance in
one factor. However, bivariate correlation and cross-tabulation analysis reveals reasonably high
levels of association between many pairs of variables. Therefore, we delete one variable at a
time and inspect the robustness of other results. Almost all the original results are robust, except
in two cases. The variable recession is positive and significant in a few alternate models (e.g.,
when year of data and data aggregation are excluded). Omission of endogeneity is not
statistically significant in a few models. We also estimate stepwise regression, in which
variables enter sequentially in order of incremental variance explained, so long as they are
significant at p < .10. All 12 significant variables in the main regression model also enter the
stepwise regression model. Details of these results are available from the authors.
We include each interaction effect mentioned in the procedure section one at a time, and
we retain them if they are significant. Two effects -- product life cycle x product type and
product life cycle x dependent variable -- are statistically significant. The percent of explained
variance increases from 37% in the model with only main effects to 40% in the model
incorporating interaction effects. The regression results are in Table 1 (Column 6).
To ascertain whether a brand’s relative price impacts advertising elasticity, we use 212
observations in which information on price is available and estimate Model (2). Due to lack of
sufficient observations, we can include only 13 of the 22 variables in the original model and
cannot estimate interactions. The coefficient of relative price is positive (.03, std. error = .05),
but not statistically significant.
Which factors influence the statistical significance of advertising elasticity? There are
437 observations in which information on statistical significance (t-values) are available. In 249
of the 437 observations (57%), advertising elasticity is significantly greater than zero. Results of
logistic regression (3) are in the Web Appendix (Table A2). Due to lack of data, interaction
15. 13
effects are not included. The results reveal fewer significant coefficients than in the original
model. Advertising elasticity is more likely to be significantly greater than zero in Europe than
in the United States, for panel data than for aggregate firm data, and for television than print
advertising. Some coefficients are marginally significant. One possible explanation for the lack
of significance in this model is as follows: A significant advertising elasticity, whether .1 or .5,
is taken as one. A non-significant coefficient, whether .001 or .05, is deemed as zero. This
recoding absorbs meaningful variation in the data, which can result in fewer significant estimates
than in the original model, with magnitude of advertising elasticity as the dependent variable.
We now present the results on short-run advertising elasticity for significant variables.
Time Trend and Recession
Median Year of Data. Given the increased competition in consumer products, the advent
of the Internet as an alternate information source, and the ability of consumers to opt out of
television commercials, we would expect consumers to be less responsive to advertising in more
recent times than in the past. Consistent with our expectations, the corresponding regression
coefficient of time (median year of data) is negative. This result is robust across models. (We
also tested a quadratic effect of time; the coefficient was non-significant.)
Prior meta-analysis by Assmus, Farley, and Lehmann (1984) uses pre-1980 data, while
our meta-analysis includes post-1980 data. Therefore, we compare advertising elasticity on pre-
1980 data (1940-1979) with that on post-1980 data (1980-2004). Instead of treating year of data
as a continuous variable, we include a dummy variable to indicate pre-and post-1980 periods.
The regression coefficient for post-1980 is -.11 (std. error = .06), indicating a significant decline
between the two time periods. The mean advertising elasticity is .13 pre-1980 (n = 463) and .10
post-1980 (n = 288).
16. 14
Temporal differences in advertising elasticity may occur because of differences in
consumer response to advertising over time, or because of differences in market characteristics
and research methods. To explore the impact of market / method factors on the temporal
differences in predicted advertising elasticity, we follow the approach in Bijmolt, van Heerde,
and Pieters (2005, p.151) and compute the contribution of various factors to the difference.
Table 3 presents the five key contributing factors that influence difference in the advertising
elasticity between pre-1980 and post-1980 periods.3
1. Firm level aggregate data comprise the primary database pre-1980 (93% use), while the
advent of scanner data increases use of panel data and reduces use of firm data post-1980
(47% use). This difference in database results in a .09 increase in ad elasticity post-1980
compared to pre-1980.
2. TV advertising is used more in the estimation post-1980 (60%) than pre-1980 (21%),
resulting in an increase in ad elasticity of .07 post-1980.
3. Europe is grossly under-represented post-1980 (1%) compared to pre-1980 (48%).
Because ad elasticity in Europe is higher than in the United States,, this difference causes
a reduction in predicted ad elasticity by .04 post-1980.
4. Early researchers tend to use more temporally aggregate (yearly) data, while later
researchers use less yearly and more weekly data. This difference causes ad elasticity to
decrease by .03 post-1980 compared to pre-1980.
5. Because markets in general have matured over time, about 88% of products studied post-
1980 are mature products, compared to 58% pre-1980. Because mature products have
lower advertising elasticity, there is .03 reduction in ad elasticity post-1980.
In summary, changes in estimates of advertising elasticity over time can be attributed to
changes in market and method characteristics. The observed negative regression coefficient for
year of data suggests that the effect persists even after accounting for these factors.
Why might the advertising response be lower in recent times? Researchers point to
advertising clutter and competitive advertising, both of which result in reduced recall and
evaluation of the brand being advertised. For example, Kent (1995) documents that the average
3
We thank one of the reviewers for suggesting this analysis.
17. 15
number of network ads per hour tripled from six in the 1960’s to 18 in the 1990’s. Danaher,
Bonfrer and Dhar (2008) report that advertising elasticity declines in the presence of high
competitive clutter.
Recession. The current economic environment highlights the need to understand how
marketing strategies should be modified in the face of recession. In particular, should
advertising budgets be curtailed or increased during recession (see Tellis and Tellis 2009 for a
recent survey of relevant literature)? If advertising elasticity is lower during recession, both the
impact factor and budgetary considerations would suggest a reduction in advertising. However,
if advertising elasticity is equal or higher during recession as during expansion, then the decision
is not clear. Our meta-analysis reveals that advertising elasticity is not lower during recessionary
times. On the contrary, advertising elasticity is higher during recession.
Product and Geographic Factors
Product Type: Availability of data permits us to test differences among many types of
product categories – pharmaceutical, food, non-food, durable, and service goods (e.g., banks,
movies). However, we do not have prior expectations for the relative magnitudes of these
product categories.
Regression coefficients (Table 1) and comparison of means reveals that durable goods
have the highest advertising elasticity, followed by pharmaceuticals and service goods.
Frequently purchased food and non-food products have the lowest advertising elasticity. Non-
food, nondurable products generally tend to be low-involvement items, such as household
cleaners, whose purchase behavior may not be significantly influenced by advertising.
Product Life Cycle: Advertising either provides information or persuades consumers
about the advertised brand. In either case, advertising is likely to be more relevant and useful in
the early stage of the product life cycle, when consumers know little about the brand or have not
18. 16
formed preferences. Thus, advertising elasticity will be higher for products in the early stage of
the life cycle than in the mature stage. Consistent with this expectation, products in the growth
stage of the life cycle have a higher advertising elasticity (.16) than products in the mature stage
(.11), and the coefficient is significant in the regression model (Table 1).
We also find an interaction between product life cycle and product type, as shown in
Figure 2. Declining advertising elasticity from the growth stage to the mature stage of the life
cycle appears to be more prominent in durable goods, moderate in food products, and is non-
significant in non-durable, non-food products.
Geographic Region: Europe may under-advertise due to regulation, the short history of
advertising in the region, or culture. The United States may have optimal or over-advertising
because of the long history of advertising, intense competition, and advertising clutter. If this
reasoning is right, then advertising elasticity is likely to be higher in Europe than in the U.S. We
find that Europe has a significantly higher advertising elasticity (.17) than the U.S. (.11), and this
effect holds in the regression model after accounting for other factors (Table 1).
Data Characteristics
Dependent Measure: Sales can be measured either in absolute terms (unit sales or dollar
revenues or purchases), or in relative terms (market share). Absolute sales capture both
competitive gains and gains due to primary market expansion. Relative sales capture only
competitive gains. Because advertising can increase primary demand, we expect advertising
elasticity to be higher when sales are recorded in absolute terms. Advertising elasticity is
slightly higher for (absolute) sales elasticity (.13) than for relative (share) elasticity (.11), but the
difference is not significant in the regression model.
However, we find a marginally significant (p < .10) interaction effect between product
life cycle and dependent measure in the regression model (Table 1). The predicted means are
19. 17
represented in Figure 3. In growth products, advertising elasticity is higher when measured with
sales as the dependent variable than when share is the dependent variable. This result is
intuitive, because the potential for an increase in primary demand (which is better captured in the
sales model) is higher in the growth stage of the life cycle.
Temporal Interval: Advertising generally has not only an instantaneous impact on sales
but also a carryover impact. So, the greater the level of temporal aggregation, the more likely it
is to capture the sales resulting from the carryover advertising. Also, the greater the level of
aggregation, the larger the bias caused by wrongly capturing the carryover effect. Hence, we
expect current period advertising elasticity to be larger when data are more aggregate (yearly or
quarterly) rather than less aggregate (weekly or daily), if the model does not fully and correctly
capture the carryover effect. Researchers typically estimate the carryover effect with the Koyck
model. The use of aggregate data leads to a positive bias in the estimation of the carryover effect
by this model (Tellis and Franses 2006).
Interestingly, we find a non-monotonic relationship between advertising and data
interval; this effect holds both when lagged sale (carryover effect) is included or omitted. Ad
elasticity is lowest with quarterly data and higher with weekly and yearly data.
Data Aggregation: Prior to the advent of scanner data, researchers estimated ad elasticity
using predominantly firm-level aggregate data. Scanner data prompts the use of panel data and
the estimation of advertising response at the individual level. Individual-level data appears to be
a more appropriate unit of analysis for measuring response to advertising. While the univariate
means are not different between the two groups (both about .12), after accounting for other
factors, advertising elasticities estimated at the aggregate firm-level are significantly lower than
those at the disaggregate consumer panel level. This result is consistent with the findings of
Christen, et al. (1997).
20. 18
A plausible explanation for this effect is that aggregate data are a linear aggregation of
individual purchases, whereas panel data estimation uses non-linear aggregation of purchases.
Gupta, et al. (1996, Tables 3 and 4) show that the price elasticity from a linear approximation to
a logit model (without heterogeneity) are biased towards zero. Hence, linear approximations
through the use of aggregate data may tend to downwardly bias advertising elasticity.
Advertising Measure: A brand’s advertising may be measured in absolute terms
(monetary value, gross rating points, etc.) or in relative terms (the brand’s share of all advertising
in the market). Depending on what competitors in the market are doing, changes in absolute
advertising may not necessarily reflect the same changes in relative advertising. If competitors
tend to match a target firm’s advertising, then large changes in absolute advertising will translate
into small changes in relative advertising. As a result, elasticities estimated with absolute
advertising will be smaller than those estimated with relative advertising. The reverse holds if
competitors do not match a target firm’s advertising or if they react in the opposite direction.
Thus, from the differences in elasticity between relative or absolute advertising measures, we
may infer how competitors match a target firm’s advertising strategy.
With respect to GRP and monetary (dollar) advertising measure, we provide a
mathematical explanation as follows: Advertisers buy GRP’s using dollars – one GRP being one
percent of target audience (reach) given one exposure The impact of advertising (i.e., elasticity)
can then be measured as the percent change in sales due to a 1% increase in GRPs, defined here
as w. Let a 1% increase in advertising dollars increase GRPs by v%, then the impact of
increasing advertising spending would be represented by vw. It follows that, other things equal,
dollar elasticity is greater than GRP elasticity if v > 1 and GRP elasticity is greater than dollar
elasticity if v < 1.
21. 19
Comparison of elasticities for absolute vs. relative advertising reveal mixed results.
Advertising elasticity with relative advertising is higher than advertising elasticity with dollar
measure of absolute advertising but lower than with GRP measure of absolute advertising.
However, within absolute advertising, elasticity measured with Gross Rating Point (GRP) is
higher (.21) than advertising elasticity with monetary value (.09); this difference is significant in
the regression model (Table 1). As stated above, this finding indicates the possibility of v < 1,
on average. That is, firms may be operating in the region where a 1% increase in advertising
dollars yields a less than 1% increase in GRP. Future research can assess if this inference holds.
Another reason for the difference in elasticity may be due to its correlation with other model
factors. For example, GRP elasticities may be highly represented in durable goods which
generally have higher ad elasticities. Our analysis reveals that GRP elasticities were primarily in
non durable goods and mature product life cycle. The results on advertising measure did not
change when these variable were excluded from the model.
Advertising Type: Even though mean TV advertising elasticity (.12) is not significantly
greater than print advertising elasticity (.11), after accounting for other factors, we find print
advertising has a lower short-term ad elasticity than TV advertising in the regression analysis
(Table 1). One reason for this effect may be because TV advertising, with its ability to arouse
emotions, may be more effective than print advertising, which relies primarily on information
appeals (Tellis, Chandy, and Thaivanich 2000). Another reason is provided by Rubinson (2009)
where he shows that TV advertising effectiveness is increasing over time (versus other media),
due to TV’s ability to increase brand awareness more effectively.
Omitted Variables
Omission of Lagged Sales: The omission of a variable biases advertising elasticity, if that
omitted variable is correlated with both the dependent variable (sales) and the included
22. 20
independent variable (advertising). The direction of the bias is the product of the signs of the
correlations of the omitted variable with sales and advertising. Lagged sales are likely to be
correlated positively with both current-period sales and current-period advertising (as current
advertising is often set as a proportion of past sales). Therefore, we expect the omission of
lagged sales to positively bias advertising elasticity. Consistent with this expectation, we find
that, after accounting for other factors, the omission of lagged sales significantly increases
advertising elasticity. Put another way, lagged sales picks up the carryover effect of advertising.
The omission of lagged sales will ensure that the current advertising picks up some of this
carryover effect.
Other Omitted Variables: Among other variables, we find that omission of distribution
significantly increases advertising elasticity, perhaps because advertised brands are better
distributed. Hence, distribution is both positively related to sales and to advertising, resulting in
a positive omission bias. The effects of the exclusion of other variables are non-significant.
Model Characteristics
Functional Form and Estimation Method: Linear and double log models tend to produce
higher advertising elasticity than share models. We find that functional form, overall, has greater
influence on short-term advertising elasticity than estimation method.
Incorporating Endogeneity and Heterogeneity: A more recent trend in estimation of
marketing mix is incorporating endogeneity. We do find that, in many models, omission of
endogeneity induces a negative bias in the estimates, which is consistent with the belief that
omitting endogeneity can bias the estimates towards zero (Villas-Boas and Winer 1999). That is,
advertising elasticity is lower when endogeneity is not incorporated.
Recent modelers also incorporate heterogeneity by allowing for differences in advertising
elasticity parameters across households in the sample, either through random effects or Bayesian
23. 21
models. However, we find that the effect of omission of heterogeneity on advertising elasticity
is not significant, i.e., omission of heterogeneity does not significantly alter the advertising
elasticity estimates.
Results on Long-Term Advertising Elasticity
Figure 1 presents the distribution of long-run advertising elasticities. There are 402 long-
run brand-level advertising elasticities. Their magnitudes range from -1.2 to 4.5. Over 40% of
the elasticities are between 0 and 0.1. About 5% of advertising elasticities are negative. The
mean long-term advertising elasticity across the 402 observations is .24, which is much lower
than the mean of .41 in Assmus, Farley, and Lehmann (1984).4
The meta-analytic results for the long-run advertising elasticity are in Table 1 (Columns
7, 8). The variables in the main model explain 29% of the variance in long-run elasticity. The
omission of lagged sales is not included as an independent variable because the coefficient of
lagged sales is used to estimate long-run elasticity (dependent variable). Six variables that are
statistically significant in the short-run elasticity models are also significant in the long-run
model. They are: year of data, product type, region, measure of advertising, omission of
distribution, and functional form.
The median long-term elasticity
is even lower than the mean at .10.
Four variables that are significant in the short-run model are not significant in the long-
run elasticity model: product life cycle, temporal interval, data aggregation, and omission of
endogeneity. One reason for the lack of significance is as follows. Because long-term elasticity
is computed using the formula: [short-term elasticity/(1-carryover effect)], the influence of a
variable on long-term elasticity depends on its influence on both short-term elasticity and
carryover effect. These two effects acting together may enhance or dampen the resultant
4
The short-term advertising elasticity in Assmus et al. (1984) is ,22 and the mean carryover is .468, leading to mean
long-term advertising elasticity of .414 [=.22/(1-.468)].
24. 22
coefficient. For example, mature products tend to have smaller short-term advertising elasticity
but may have equal or smaller carryover effect compared to growth products. Hence, the effect
of product life cycle on long-run elasticity may not be significant.
One surprising finding is that TV advertising has higher short-run elasticity but lower
long-run elasticity than does print advertising. The higher long-run elasticity for print
advertising may be because information in print (especially magazines) remains in memory for a
longer period than TV advertising. Some variables that are not significant in the short-run model
are significant in the long-run model: long-term ad elasticity is higher during recessions than in
expansions; omission of lagged advertising and promotion are also significant in the long-run
elasticity models.
IMPLICATIONS
The meta-analysis results have implications for managers and researchers.
Implications for Managers
The implications for managers relate to advertising budget determination and
identification of conditions that favor or deter advertising.
Advertising Budgeting: We find the mean short-run advertising elasticity across all
observations (1940-2004) is .12, the median elasticity is .05, and elasticity is declining over time.
The finding that advertising elasticity is “small” seems to upset many practitioners, especially
those in the agency business. This number seems even more troubling when one compares it to
price elasticity, which meta-analyses suggest is over 20 times larger at -2.62 (Bijmolt, van
Heerde, and Pieters 2005; Tellis 1988). However, a comparison of absolute elasticity may miss
some pertinent issues. First and most importantly, price cuts affect revenues and profits
immediately. So, while a small price cut can greatly enhance sales, it does not necessarily
increase profits. Second, advertising has the potential to support a higher price. Third, price cuts
25. 23
can be selectively directed to only some consumers in order to minimize harm to the bottom line.
Fourth, price cuts given to retailers may not be passed on to consumers.
Sethuraman and Tellis (1991) develop a model to integrate these factors and draw
managerial implications about how advertising and price elasticities should affect managers’
tradeoff between advertising and price discounting. In particular, they show that the advertising
increase (ΔA) that would yield the same profits as a given price cut (Δp) in the short term can be
computed from the equation:
(4)
s/Ak
g/fk
=
p/pΔ
A/AΔ
A
p
-
-
ε
ε
where p is the price, A is advertising, k is contribution to price ratio, f is the fraction of consumer
availing of the discount, g is retail pass-through of discount, S is dollar sales, and εp and εA are
price and advertising elasticities, respectively. The optimum advertising-to-sales ratio is given by
(A/S)* = (f/g)( εA / εp). Table 4 presents optimal results using the above formulas for different
values of advertising elasticity, based on the following illustrative values: εp (absolute) = 2.6
(Bijmolt et al. 2005), f = .5, g = .5 and k = .5, A/S = .05 (all from Sethuraman and Tellis 1991).
Table 4 suggests a reduction in budgets allocated to conventional advertising in keeping
with the declining trend in advertising elasticity. Alternately, a firm can take steps to increase
advertising elasticity. Kent (1995) suggests the creation of unique messages, negotiating for
non-compete coverage, and more precise targeting of advertising as some ways to overcome the
harmful effects of advertising clutter and increase consumers’ responsiveness to advertising.
Advertising and Recession: Conventional belief is that advertising should be reduced
during recession because sales are lower or consumers are more price sensitive and less likely to
be influenced by advertising in periods of recession than in periods of expansion. First, our
results reveal that neither short-term nor long-term advertising elasticities are lower during
26. 24
recession, measured as the percent of the estimation period under recession. So, at a minimum,
managers need not reduce advertising in a recession because they falsely believe that the sales
impact of advertising will be lower than in expansion periods.
Second, while the coefficient of recession for short-term advertising elasticity is positive,
though not statistically significant, the coefficient for long-term elasticity is positive and
significant suggesting that, in general, advertising elasticity is higher during recession. Possible
reasons for this effect might be that during recession relative to expansion: (i) advertising clutter
is lower due to cutbacks in advertising; (ii) consumers pay better attention to ad messages in
order to be astute buyers; or (iii) ad budgets are supported by higher price and promotional
incentives. One reason for the positive effect of long-term elasticity may be that the reduced
clutter and increased attention to advertising during recession may not translate into immediate
purchases (short-term), because of the tight economy at that time, but may translate into
purchases at a later point in time (long-term) when the economy improves (see Tellis and Tellis
2009 for supporting evidence from other studies).
Conditions Favoring Advertising: Our finding of higher advertising elasticity suggests
that, other things equal, advertising should be higher for durable goods over non-durable goods
and for products in the early stage of the life cycle over mature products. The higher advertising
elasticity in Europe than in the United States calls for a broader understanding of whether there is
over-advertising in the U.S. (Aaker and Carman 1982) and under-advertising in Europe.
Implications for Researchers
The implications for researchers relate to methods for estimating advertising elasticity.
Temporal Interval: Advertising elasticity is significantly different depending on whether
weekly, quarterly, or yearly data are used. These significant differences underscore the need for
determining and using the “right” data interval for estimating advertising elasticity. The
27. 25
conventional view is that the best data interval matches the inter-purchase time for the product
category. Recently, Tellis and Franses (2006) have shown that the optimal data interval that
provides an unbiased estimate of advertising elasticity is the unit exposure time, defined as the
largest calendar period such that advertising occurs at most once and at the same time in that
period. This could be minutes or hours in some TV advertising, or days or weeks in print
advertising. Furthermore, these authors show that more temporally disaggregate data does not
bias the estimates. These findings would suggest that, if data are available, less aggregate daily
or weekly data may be better than quarterly or yearly data for obtaining unbiased estimates of
advertising elasticity.
Incorporating Endogeneity: We do find that, in many models, the omission of
endogeneity induces a negative bias in advertising elasticity. One implication is that endogeneity
should be taken into account when appropriate for the model and context; however, it should not
be added as a “check-list” item to the research (Shugan 2004). For instance, there is some
question as to whether price is truly endogenous for panel models estimated at the daily level,
because retailers may not be able to determine optimal prices and may change them every day
(Erdem et al. 2008). Similar arguments could be made for advertising response, as it is unlikely
that brand manufacturers can detect and/or adjust their advertising levels quickly enough to
adjust for weekly shifts in consumer demand. Clearly, they can detect and respond to shifts in
demand over longer periods of time (quarterly or yearly).
Other Factors: We find that the omission of distribution has a positive effect on ad
elasticity, while functional forms such as linear or double-log may produce different elasticities.
Researchers should be cognizant of these differences and take the following steps: (i) include as
many relevant covariates (e.g., price, promotion, quality) as are available; and (ii) understand the
28. 26
right econometric approach for the problem at hand or assess the sensitivity of their estimates of
the elasticity to estimation procedures.
Non-Significant Variables: A number of variables are not significant in the regression
model. Does this mean that these factors can be ignored while estimating advertising elasticity?
We note that the absence of evidence of effects in the meta-analysis should not be taken as
evidence of the absence of an effect. The lack of significance could be due to the lack of proper
data, noise in the data, the aggregation effect, or other procedural reasons. Our view is that the
“right” data and procedure must be used where possible. For example, the omission of
heterogeneity does not significantly influence advertising elasticity in our meta-analysis. This
does not mean researchers can safely ignore heterogeneity. It is generally appropriate to account
for heterogeneity in advertising response, especially when estimating with panel data.
CONCLUSION
We meta-analyze 751 brand-level short-term advertising elasticities and 402 long-term
advertising elasticities. Our objective is to update the earlier study by Assmus, Farley, and
Lehmann (1984) and to add to the inventory of empirical generalizations by Hanssens (2009).
We obtain several useful generalizations, which we list below. We then present the limitations
and future research directions.
Key Empirical Generalizations
1. The average short-term advertising elasticity across the 751 observations is .12, which is
substantially lower than the mean of .22 in Assmus, Farley, and Lehmann (1984), from 128
observations. The median advertising elasticity is even lower at .05.
2. The average long-run advertising elasticity across the 402 observations is .24, which is lower
than the implied mean of .41 in Assmus, Farley, and Lehmann (1984), from 128
observations. The median long-term advertising elasticity is even lower at .10.
3. There is a decline in short-term advertising elasticity. There is a decline over time in long-
term advertising elasticity. . These results suggest a reduction in conventional advertising if
the firm was advertising optimally in the past.
29. 27
4. On average, advertising elasticity does not decrease during recession. If anything, there is a
positive relationship between months of recession in the dataset and advertising elasticity.
This result suggests that a firm does not need to cut back on advertising in a recession
because it believes customers will not be responsive to advertising.
5. Advertising elasticity is higher for durable goods than non-durable food and non-food
products. The finding favors advertising for durable goods, other things being equal.
6. Short-run advertising elasticity is higher for products in the early stage of the life cycle than
those in the mature stage. This effect is especially prominent in durable goods. This result
supports focusing on advertising during the early stage and on price during later stages of the
life cycle, especially for durable goods.
7. Advertising elasticity is generally higher in Europe than in North America, raising a question
of whether there is under-advertising in Europe and over-advertising in the U.S.
8. There is a non-monotonic relationship between advertising elasticity and data interval. The
elasticities estimated from both weekly and yearly data are higher than those from quarterly
data. This result reinforces the need for using the appropriate data interval as derived by
Tellis and Franses (2006).
9. TV advertising elasticity is generally higher than print advertising elasticity in the short term,
but print advertising elasticity is higher than TV advertising elasticity in the long term . This
finding calls for a careful consideration of cost and effectiveness when allocating budgets
between the two media.
10. Advertising elasticity is lower when endogeneity in advertising is not incorporated in the
model. When appropriate, researchers should attempt to incorporate endogeneity using
recently developed New Empirical Industrial Organization (NEIO) models, or acknowledge
that the estimate may be lower because of the omission.
Limitations and Future Research
Our study has some limitations that are typical of most meta-analytic research. First,
while we have tried to be exhaustive in our literature review, we may have overlooked some
publications that estimate advertising elasticity. Second, in identifying the factors that influence
advertising elasticity, we are limited by the variables that are available in the original studies.
For example, we could not collect data on all four stages of the life cycle or individual country of
origin, so we could not estimate influences of these variables on advertising elasticity.
These limitations provide potential directions for future research. On a more substantive
level, future research must try to analyze more growth products, durable goods, industrial goods,
30. 28
and service goods. Future research can also measure the effects of online advertising and
incorporate them in meta-analyses as well as perform a meta-analysis of the duration of
advertising – the period during which the effect of advertising lasts.
31. 29
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33. 31
Table 1
Meta-Analysis Model (2) Regression Coefficients (Standard Errors)
No Variable
Level
Exp.
Sign
Short-Term Ad Elasticity Long-Term Ad Elasticity
Main effect
only
Main +
Interaction
effect
Main effect
only
Main +
Interaction
effect
0 Intercept All obs. .07(.12) -.08(.17) .06(.2) -.26(.21)
Time Trend and recession
1 Time Trend Year of data - -.004(.002)** -.004(.001)*** -.005(.002)** -.007(.003)***
2 Recession
Months of
recession
- .01(.06) .02(.06) .42(.10)*** .34(.09)***
Product and Geographic Factors
3 Product type
Drug ? .19(.09)** .16(.14) .14(.11) .29(.13)***
Durable ? .29(.09)*** .26(.06)*** .27(.08)*** .48(.1)***
food ? .03(.03) -.15(.06)** .08(.05) -.13(.1)
service ? .10(.07) -.04(.11) -.10(.08) -.08(.08)
Non Food base 0 0 0 0
4
Product life
cycle
Mature - -.08(.05)** -.08(.06)* .08(.06) .15(.12)
Growth base 0 0 0 0
5
Region
(continent)
Europe + .09(.05)** .16(.06)*** .16(.05)*** .34(.08)***
Other ? .05(.05) .06(.05) .09(.06) .08(.05)
America base 0 0 0 0
Data Characteristics
6
Dependent
measure
Absolute + -.03(.02) .08(.07) -.12(.04)*** .20(.10)**
Relative base 0 0 0 0
7
Temporal
Interval
Weekly - .04(.03) .05(.03) .05(.06) .04(.07)
Yearly + .08(.04)** .09(.03)*** .10(.11) -.03(.18)
Quarterly base 0 0 0 0
8
Data
aggregation
Firm ? -.20(.05)*** -.24(.06)*** .07(.08) -.03(.06)
Panel Base 0 0 0 0
9
Advertising
measure
Relative ? .07(.03)** .07(.03)*** -.11(.07)* -.10(.07)
GRP ? .16(.08)** .16(.09)** .16(.06)*** .30(.09)***
Monetary base 0 0 0 0
10
Advertising
type
TV ? .19(.09)** .21(.09)** -.17(.05)*** -.18(.05)***
Aggregate ? .11(.06)* .14(.05)** -.03(.05) -.01(.05)
Print base 0 0 0 0
Omitted Variables
11
Lag dependent
variable
Omitted + .10(.07)* .09(.06)* -- --
Included base 0 0 -- --
12
Lag
advertising
Omitted + .002(.03) .01(.03) .14(.04)*** .13(.03)***
Included base 0 0 0 0
13 Lag price
Omitted - .01(.05) .03(.05) .04(.08) .17(.12)
Included base 0 0 0 0
34. 32
14 Price
Omitted - -.01(.03) -.01 (.03) .03(.05) .02(.07)
Included base 0 0 0 --
15 Quality
Omitted ? -.02(.07) -.04(.06) -.15(.08)* -.11(.07)
Included base 0 0 0 0
16 Promotion
Omitted ? -.03(.08) -.01(.08) .13(.08)* .14(.07)**
Included base 0 0 0 0
17 Distribution
Omitted + .11(.04)*** .11(.04)*** .10(.05)** .11(.06)**
Included base 0 0 0 0
Model Characteristics
18
Functional
form
Double log ? .14(.07)** .14(.08)* .16(.07)*** -.07(.09)
Linear ? .26(.10)*** .24(.09)*** .07(.10) .12(.10)
other ? .23(.09)*** .22(.08)*** -.28(.09)*** -.13(.10)
share base 0 0 0 0
19
Estimation
Method
GLS ? -.02(.03) -.04(.03) -.17(.05)*** -.18(.04)***
MLE ? .05(.05) .02(.05) .12(.08) .18(.09)**
OLS ? .004(.02) -.01(.02) -.10(.06)* -.12(.07)*
Other base 0 0 0 0
20 Endogeneity
Omitted - -.16(.08)** -.16(.08)** -.01(.07) .04(.07)
Included base 0 0 0 0
21 Heterogeneity
Omitted ? -.06(.06) -.04(.07) .07(.09) .09(.10)
Included base 0 0 0 0
Other Characteristics
22 Study type
Published - .09(.10) .07(.12) -.02(.17) -.16 (.16)
Working base 0 0 0 0
Interaction Effects
1 Mature life cycle*durable ? -- -.34 (.13)*** -- -.39(.11)***
2 Mature life cycle*food ? -- -.10(.18) -- .21(.14)
3 Mature life cycle*nonfood ? -- .12(.12) -- --
4 Life cycle*abs - -- -.13(.09)* -- -.40(.14)***
Note
Expected (Exp.) sign: + = positive relationship (compared to base level); - = negative relationship;
? = ambiguous relationship
***p < .01, **p < .05, * p < .10;
One –tailed test used if expected sign is unambiguous ( + or -)
Two-tailed test used if expected sign is ambiguous (?)
-- = coefficient not included or not estimable.
35. 33
Table 2
Potential Influencing Factors of Advertising Elasticity
# Variable/
Level
Expected relationship with advertising
elasticity (a.e.)
Operationalization /
how data obtained
Time Trend and Recessionary Factors
1
Median year of
data
Advertising elasticity would decrease over time
because of increased competition, ad clutter,
the advent of the Internet as an alternate
information source, and the ability of the
consumer to opt out of television commercials
through devices such as TiVo.
Median year of the estimation period is used
to detect time trend. For example, if the
study used data from 1982-1990 to estimate
advertising elasticity (a.e.), then that a.e.
observation is said to come from its median
year 1986.
2
Recession
During recessionary times, consumers would
become more price conscious and tend to
ignore generally image-based advertising. So
a.e. would be smaller during recessionary
times.
Recession is defined as two quarters of
negative GDP growth. Data for U.S. and
other countries obtained from NBER and
OECD web sites. Where recession data is
not identified, U.S. data is substituted.
Recession variable is measured as the
number of months that the economy is in
recession as a proportion of total months in
the estimation period.
Product and Geographic Factors
3
Product type
Pharmaceutical
Durable
Food
Non Food
Service
No prior expectations.
Category type information is directly
obtained from the individual studies.
4
Product life
cycle
Growth
Mature
Advertising either provides information or
persuades consumers about the advertised
brand, which are more relevant in the early
stage of the life cycle, when consumers know
little about the brand or have not formed
preferences. Thus advertising elasticity will be
higher for products in the early stage of the life
cycle than in mature stage.
Product life cycle information is directly
obtained from the individual studies. Where
the authors indicated, the product is an
established product, it is classified as a
mature product.
5
Region
America
Europe
Other
Europe may have under advertising due to
regulation, short history of advertising , or
culture, while the US may have optimal or
over-advertising because of the long history of
advertising, intense competition, and
advertising wars. If this reasoning is right, then
advertising elasticity is likely to be higher in
Europe than in the US.
Region information is based on the
continent in which the data for estimation of
a.e. is obtained. Most data in the American
continent are from the U.S. Many studies
which estimate data from Europe state the
country of the data (e.g., France, Germany).
However, we cannot analyze at the country
level because there are inadequate
observations at the country level to obtain
credible regression estimates.
36. 34
Data Characteristics
6
Temporal
Interval
Weekly
Quarterly
Yearly
Advertising generally has a carryover impact.
So, the greater the level of temporal
aggregation, the more likely it is to capture the
sales resulting from the carryover advertising.
Hence, we expect current period advertising
elasticity to be larger when data are more
aggregated (Yearly or Quarterly) than less
aggregated (weekly or daily), if the model does
not capture the carryover effect.
Data interval information is directly
obtained from the individual studies. Some
levels are combined due to paucity of data:
Weekly – Daily, weekly, monthly
Quarterly – Bimonthly, quarterly
Yearly -- annual
7
Data
aggregation
Firm
Panel
Estimation of a.e. using firm level data
implicitly aggregates consumer level
information in a linear fashion. Estimation of
a.e. with panel data uses maximum likelihood
estimation that combines information in a non-
linear fashion. So, the results may be different
but the direction of change is unknown
Most of the data are aggregated across
consumers at the brand level. These
aggregated data are called firm-level data.
The panel data type consists of individual
consumer level choice data with
corresponding individual advertising data
(exposures).
8
Dependent
measure
Absolute (sales)
Relative
(share)
Absolute sales capture both competitive gains
and gains due to primary market expansion.
Relative sales capture only competitive gains.
Because advertising can increase primary
demand, we expect advertising elasticity to be
higher when sales are recorded in absolute
terms.
Data on dependent measure is directly
obtained from the estimation model that
produced the elasticity. If the model has
unit or dollar sales as dependent variable,
then type is absolute. If the dependent
variable is market share, it is classified as
relative.
9
Advertising
measure
Monetary
GRP
Relative
Depending on what competitors in the market
are doing, changes in absolute advertising may
not necessarily reflect the same changes in
relative advertising. If competitors tend to
match a target firm’s advertising, then large
changes in absolute advertising will translate
into small changes in relative advertising. As a
result, elasticity estimated with absolute
advertising will be smaller than those estimated
with relative advertising. The reverse holds if
competitors do not match the advertising.
A brand’s advertising may be measured in
absolute terms – monetary values or gross
rating points or in relative terms (the
brand’s share of advertising in the market).
Data on advertising measure directly
obtained from the individual studies. Where
the researchers used absolute advertising,
information is provided as to whether
advertising is measured in monetary units or
gross-rating points.
10
Advertising type
Print
TV
Aggregate
It is not clear whether consumers are more
responsive to print advertising or TV
advertising. However, because aggregate
advertising is a combination of print and TV
ads, we expect a.e. from aggregate advertising
to be between print and TV advertising.
Directly obtained from the type of
advertising described in individual studies.
Advertising is aggregate if the advertising is
a combination of more than one type of
advertising (print / TV/billboards etc.).
Where nothing is mentioned, deemed as
aggregate advertising.
Omitted Variables
11
Lag dependent
variable
Omitted
Included
Lagged sales are likely to be correlated
positively with current period sales and current
period advertising (as current advertising is
often set as a proportion of past sales).
Therefore, we expect omission of lagged sales
to positively bias advertising elasticity.
Directly obtained from the model from
which the advertising elasticity is estimated.
37. 35
12
Lag advertising
Omitted
Included
Lagged advertising is likely to be correlated
positively with current period sales and current
period advertising. Therefore, we expect
omission of lagged advertising to positively
bias the advertising elasticity measure.
Directly obtained from the model from
which the advertising elasticity is estimated.
13
Lag price
Omitted
Included
Lagged price is likely to be correlated
negatively with current period sales and
positively with current period advertising.
Therefore, omission of lagged price will
negatively bias the advertising elasticity.
As above
14
Price
Omitted
Included
Price is likely to be correlated negatively with
current period sales and positively with current
period advertising. Therefore, we expect
omission of price to negatively bias the
advertising elasticity measure.
As above
15
Quality
Omitted
Included
Unable to predict the sign of correlation
between quality and sales and hence the
direction of the effect
As above
16
Promotion
Omitted
Included
Unable to predict the sign of correlation
between promotion and advertising.
As above
17
Distribution
Omitted
Included
Distribution is likely to be correlated positively
with current period sales and positively with
current period advertising. Therefore, we
expect omission of distribution to positively
bias the advertising elasticity measure.
As above
Model Characteristics
18
Functional form
Double log
Linear, Share
Other
No prior expectations
Directly obtained from the model from
which the advertising elasticity is estimated.
19
Estimation
method
GLS, OLS
Other, MLE
No prior expectations
Directly obtained from the model from
which the advertising elasticity is estimated.
20
Endogeneity
Omitted
Included
No theoretical reasoning but Vilas Boas and
Winer (1999) find that omitting endogeneity in
price elasticity estimation biases the estimate
toward zero.
A model incorporates endogeneity if it
treats advertising as a dependent variable
endogenously determined within the model
structure.
21
Heterogeneity
Omitted
Included
No prior expectations
A model that allows for differences in
advertising response parameters across
households or segments in the sample is
deemed to incorporate heterogeneity.
Other Factors
22
Study type
Published
Unpublished
Because of the general bias toward publishing
articles that product significant effects, a.e. in
published articles should be higher than a.e.
from unpublished works.
Directly obtained from the studies.
38. 36
Table 3
Key Contributors to changes in Short-Run Advertising Elasticity – Pre and Post 1980
Variable Level
Model (2)
Main Effect
Coefficient
% in group
Post-1980
% in group
Pre-1980
Contribution
to advertising
elasticity
Aggregation Firm -0.195 46.5 93.3 0.09
Ad type TV 0.193 59.7 21.4 0.07
Region Europe 0.086 1.1 48.4 -0.04
Data interval Yearly 0.083 3.8 36.3 -0.03
Life cycle Mature -0.083 87.9 57.5 -0.03
Sample Interpretation and Illustration for Aggregation
The regression coefficient from main effects Model (2) for data aggregation (firm vs. panel) is -.195; that
is ad elasticity estimated from firm data is .195 lower than that from panel data. Panel data s rarely used
and firm level data s predominantly used pre-1980 -- about 93% of short-run ad elasticity observations
pre-1980 are from firm data, whereas 47% of the observations Post-1980 use firm data. This difference
in data representation results in an increase in mean predicted advertising elasticity of .09 post-1980
compared to pre-1980 period [computed as -.195*(46.5-93.3)/100 = .09, rounded to two decimals]
Table 4
Optimal Advertising for Different Values of Advertising Elasticity
Basis for advertising
elasticity
Ad elasticity Optimal
advertising as
% of sales
Percent advertising
increase needed to
match 1% price cut
Prior meta-analysis - 1984
Mean short-run .22 8.5 5
This meta-analysis - 2010
Mean short-run .12 4.6 30
Median short-run .05 1.9 ---*
*Not computable since denominator in Equation (4) is zero or negative. The denominator
being negative implies that the incremental profits from an advertising increase are negative.
Therefore, the firm should reduce its advertising and not increase advertising.
39. 37
Note: Pharmaceutical and service goods not reported due to small sample sizes (< 10).
Durable
short-run
long-run
0.08
40. 1
WEB APPENDIX – Table A1
Studies in the Meta Analysis
# Authors Year Publication
Volume
&
Pages Title
# of
STAE
# of
LTAE
1
Aribarg and
Arora
2008
Journal of
Marketing
Research
45
(Aug),
391-402
Brand Portfolio Promotions 10 10
2
Baidya and
Basu
2007
Journal of
Targeting,
Measurement and
Analysis for
Marketing
16 (3),
181-188
Effectiveness of Marketing
Expenditures: A Brand Level
Case Study
1 0
3
Balachander
and Ghose
2003
Journal of
Marketing
67 (4),
4-13
Reciprocal Spillover Effects: A
Strategic Benefit of Brand
Extensions
15 9
4 Bemmaor 1984
Journal of
Marketing
Research
21 (Aug)
298-308
Testing Alternative
Econometric Models on the
Existence of Advertising
Threshold Effect
20 0
5 Bird 2002
Applied Economics
Letters
9,
763-767
Advertise or Die: Advertising
and Market Share Dynamics
Revisited
7 7
6
Bridges,
Briesch and
Shu
2009 Working Paper
Do Target Markets Respond
Differentially to Advertising,
and If So, How?
43 0
7
Brodie and
Kluyver
1984
Journal of
Marketing
Research
21(May)
194-201
Attraction Versus Linear and
Multiplicative Market Share
Models: An Empirical
Evaluation
22 22
8
Capps, Seo
and Nichols
1997
Journal of
Agricultural and
Applied Economics
29 (2),
291-302
On the Estimation of
Advertising Effects for
Branded Products: An
Application to Spaghetti
Sauces
3 0
9
Carpenter,
Cooper,
Hanssens &
Midgley
1988 Marketing Science
7(4),
393-412
Modeling Asymmetric
Competition
10 0
10
Chintagunta,
Kadiyali and
Vilcassim
2006 Journal of Business
79 (6),
2761-87
Endogeneity and Simultaneity
in Competitive Pricing and
Advertising: A Logit Demand
Analysis
27 27
11 Clarke 1973
Journal of
Marketing
Research
10
(Aug),
250-261
Sales Advertising Cross-
Elasticities and Advertising
Competition
18 18
12
Cowling and
Cubbin
1971 Econometrica
38
(Nov),
378-394
An Econometric Investigation
of the United Kingdom Car
Market
30 12
13
Crespi and
Marette
2002
Journal of
Agricultural
Economics
84 (3),
691-701
Generic Advertising and
Product Differentiation
2 0
41. 2
14
Danaher,
Bonfrer and
Dhar
2008
Journal of
Marketing
Research
45
(Apr),
211-225
The Effect of Competitive
Advertising Interference on
Sales for Packaged Goods
15 15
15
Deighton,
Henderson
and Neslin
1994
Journal of
Marketing
Research
31 (Feb),
28-43
The Effects of Advertising on
Brand Switching and Repeat
Purchasing
12 12
16
Doganoglu
and Klapper
2006
Quantitative
Marketing &
Economics
4,
5-29
Goodwill and Dynamic
Advertising Strategies
3 3
17
Dube and
Manchanda
2005 Marketing Science
24 (1),
81-95
Differences in Dynamic Brand
Competition Across Markets:
An Empirical Analysis
9 8
18
Dube, Hitsch
and
Manchanda
2005
Quantitative
Marketing and
Economics
3,
107-144
An Empirical Model of
Advertising Dynamics
2 2
19
Erdem and
Sun
2002
Journal of
Marketing
Research
39
(Nov.)
408-420
An Empirical Investigation of
the Spillover Effects of
Advertising and Sales
Promotions in Umbrella
Branding
4 0
20 Erickson 1977
American
Marketing
Association
125-129
The Time Varying
Effectiveness of Advertising
3 3
21
Ghosh, Neslin
and
Shoemaker
1984
Journal of
Marketing
Research
21(May)
202-210
A Comparison of Market Share
Models and Estimation
Procedures
8 8
22 Goeree 2004 Working Paper
WP
2004-09
Advertising in the U.S.
Personal Computer Industry
8 0
23
Holak and
Reddy
1986
Journal of
Marketing
50 (4),
219-227
Effects of a Television and
Radio Advertising Ban: A
Study of the Cigarette Industry
20 20
24
Houston and
Weiss
1974
Journal of
Marketing
Research
11
(Mar),
151-155
An Analysis of Competitive
Market Behavior
5 4
25 Hsu and Liu 2004
Journal of
International Food
and Agri Marketing
16 (1),
7-18
Evaluating Branded
Advertising of Fluid Milk
Products in Taiwan
5 0
26
Jedidi, Mela
and Gupta
1999 Marketing Science
18 (1),
1-22
Managing Advertising and
Promotion for Long-Run
Profitability
4 4
27 Jeuland 1979
Marketing Science
Institute
Proceedings
310-326
Empirical Investigation of
Price and Advertising
Competition Using a Market
Share Model
10 0
28 Johansson 1973
Journal of
American
Statistical
Association
63
(Dec),
824-827
A Generalized Logistic
Function With an Application
to the Effect of Advertising
2 0
29 Iizuka and Jin 2005
Social Sciences
Research Network
Working
Paper
Direct to Consumer
Advertising and Prescription
Choice
3 3
42. 3
30
Kuehn,
McGuire and
Weiss
1966
Chicago: American
Marketing
Association
Measuring the Effectiveness of
Advertising in Science,
Technology and Marketing
1 0
31 Lambin 1969
Journal of
Industrial
Economics
17
(Apr),
86-103
Measuring the Profitability of
Advertising: An Empirical
Study
3 3
32 Lambin 1970 Journal of Business
43 (Oct),
468-484
Optimal Allocation of
Competitive Marketing Efforts:
An Empirical Study
3 3
33 Lambin 1972
Journal of
Marketing
Research
9 (May),
119-126
A Computer On-line
Marketing Mix Model
2 2
34 Lambin 1976
Amsterdam: North
Holland Publishing
Company
Book
Advertising, Competition and
Market Conduct in Oligopoly
Over Time
176 48
35
Leach and
Reekie
1996 Applied Economics
28:
1081-91
A Natural Experiment of the
Effect of Advertising on Sales:
The SASOL Case
6 6
36
Lee, Fairchild
and Behr
1988 Agribusiness
4 (6),
579-589
Commodity and Brand
Advertising in the US Orange
Juice Market
4 4
37 Lyman 1994
Journal of
Regulatory
Economics
6:
41-58
Advertising and Sales
Promotion in Electricity
4 20
38 Metwally 1974
The Review of
Economics and
Statistics
57 (Nov)
417-27
Advertising and Competitive
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44. 5
Table A2
Regression Results – Alternate Models: Coefficient (Standard Error)
Level
Exp.
Sign
Model with
uncertainty
Logit Model (3)
0 Aggregate/Intercept All obs. .153(.09) -7.21(99.8)
Time Trend and recession
1 Time Trend continuous - -.002(.001)** .02(.02)
2 Recession continuous - .11(.04)*** .57(1.15)
Product and Geographic Factors
3 Product type
Drug ? .24(.03)*** -9.03(198.3)
Durable ? .09(.04)** 1.15(49.6)
food ? -.002(.02) 2.56(49.6)
service ? .14(.06)** -.01(.27)
Non Food base 0 0
4 Product life cycle
Mature - -.07(.02)*** -.01(.27)
Growth base 0 0
5 Region (continent)
Europe + .12(.04)*** 1.52(.55)***
Other ? -.08(.02)*** -1.74(.58)***
America base 0 0
Data Characteristics
6 Dependent measure
Absolute + .04(.03)* .05(.22)
Relative base 0 0
7 Temporal Interval
Weekly - -.01(.04) .58(.45)
Yearly + .07(.02)*** -.42(.41)
Quarterly base 0 0
8 Data aggregation
Firm ? -.23(.04)*** -.88(.5)*
Panel Base 0 0
9 Advertising measure
Monetary ? -.01(.02) .68(.47)*
GRP ? .17(.09)** 1.41(.88)
Relative base 0 0
10 Advertising type
TV ? .15(.06)** .97(.52)*
Aggregate ? .02(.04) -.73(.35)**
Print base 0 0
Omitted Variables
11
Lag dependent
variable
Omitted + .05(.02)** .09(.19)
Included base 0 0
12 Lag advertising
Omitted + .02(.01)** .26(.25)
Included base 0 0
13 Lag price
Omitted - .1(.04)*** -.63(.5)
Included base 0 0
14 Price
Omitted - -.01(.02) .36(.2)*
Included base 0 0
45. 6
15 Quality
Omitted ? .07(.02)*** .4(.35)
Included base 0 0
16 Promotion
Omitted ? -.13(.05)** .52(.53)
Included base 0 0
17 Distribution
Omitted + .005(.01) .19(.25)
Included base 0 0
Model Characteristics
18 Functional form
Double log ? .14(.04)*** 3.29(86.7)
Linear ? .33(.05)*** 3.65(86.7)
other ? .3(.06)*** 4.65(86.7)
share base 0 0
19 Estimation Method
GLS ? -.001(.03) -1.16(.68)*
MLE ? -.13(.05)** .87(1.25)
OLS ? .06(.01)*** .15(.46)
Other base 0 0
20 Endogeneity
Omitted ? -.2(.03)*** -.18(.44)
Included base 0 0
21 Heterogeneity1 Omitted ? -- --
Included base -- --
Other Characteristics
22 Study type
Published - -- --
Working base -- --
Notes: -- = coefficient not estimable due to lack of data.
1. Both discrete and continuous heterogeneity are included in this measure as there is only one study
(Balanchander, et al) using discrete heterogeneity out of nine that accounted for heterogeneity.
Given the few observations (9), this effect is not able to be reliably estimated.