RT Journal Article
SR Electronic
T1 Estimating advertising effects on sales in a competitive setting
JF Journal of Advertising Research
JO J Advert Res
FD WARC
SP 310
OP 321
DO 10.2501/JAR-43-3-310-321
VO 43
IS 3
A1 Boonghee Yoo
A1 Rujirutana Mandhachitara
YR 2003
UL http://www.journalofadvertisingresearch.com/content/43/3/310.abstract
AB Over the last several decades, advertising effects on sales have been studied without appropriately taking into consideration competitors' advertising activities. As a result, advertisers often instinctively match competitors' 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 other's 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.