Estimating Advertising Effects on Sales in a Competitive Setting

Boonghee Yoo · Rujirutana Mandhachitara

36 citations0/0 files storedJournal of Advertising Research

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Marketing and Advertising Strategies Consumer Market Behavior and Pricing Forecasting Techniques and Applications

Abstract

ABSTRACT Over the last several decades, advertising effects on sales have been studied without appropriately taking into consideration competitors9 advertising activities. As a result, advertisers often instinctively match competitors9 spending proportionately when it is monitored. The weakness of such a competitive parity approach is that they implicitly assume zero-sum competition only. This study identifies a variety of competitive conditions under which better budgeting strategies can be formulated. Specifically, four types of competition are conceptualized based on how an advertiser and its competitors affect each other9s sales according to level of media advertising spending. In addition, appropriate strategies for setting advertising budgets to deal with each situation are discussed. A mathematical method is developed to measure advertising effectiveness for both the advertiser and competitors on sales of a focal brand. The method computes current and carryover effects, identifies in which type of competition the advertiser is operating, and, accordingly, determines which budgeting strategy best suits the situation. In an empirical illustration, the method was applied to data collected monthly over eight years. The analyzed product was Scotch whisky sold in Thailand.

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References

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