Designing the Content of Advertising in a Differentiated Market (CEIBS Working Paper, No. 006/2020/MKT)


In many markets, consumers use detailed attribute information to assess the value they expect
from purchasing a product or service. Markets that Öt this description include LED monitors,
wine, some OTC healthcare products, mattresses and automobile tires. In these markets, quality
di§erences exist yet many di§erences are horizontal in nature: the consumer is interested in Önding a product that meets her unique tastes. Beyond ensuring that consumers know the brand,
the category and the price; in these markets, it seems advertising should provide consumers with
detailed attribute information. However, a signiÖcant proportion of advertising does not provide
it. In fact, within the same category, competitors respond to messages that emphasize detailed
attribute information with messages that are devoid of attribute information. These messags are
uniformative about product attributes. We explore how competition in a di§erentiated market
is a§ected by the ability of a Örm has to choose uninformative messages. We construct a model
to investigate the factors that a§ect a Örmís decision to use advertising with detailed attribute
information or advertising that does not provide attribute information. The model demonstrates
that content decisions about advertising are a§ected by the di§erences between products, the
range of heterogeneity in consumer tastes and the degree to which costs increase as a function of
the quantity of information in advertising. Surprisingly, even when the cost to increase the quantity of information in advertising is low, uninformative campaigns can be more proÖtable than
campaigns with detailed attribute information. The analysis also demonstrates that Örms may
be more likely to provide detailed attribute information when there are less consumers that are
attribute-sensitive. Finally, the model shows that uninformative messages can create "artiÖcial
di§erentiation" in some conditions.


Author Community

[Soberman, David A] University of Toronto

[Xiang, Yi] China Europe International Business School (CEIBS)

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Publish Date:2020-03


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