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.
We study the incentive of a firm to provide deceptive information on the value of its product.
Consumers take into account the possibility of certain exaggeration or deception in firm’s claims.
Therefore they may discount such claims and search for extra information to verify the messages.
Such reactions from the consumers would in turn influence the firm’s incentives to conduct deceptive advertising. Based on a simple model we find that a monopoly firm with a low quality
product has a stronger incentive to send out a deceptive message when the consumers’ prior belief
is favorable to the product. We also investigate the firm’s choice on the format of the message
when delivering false claims, i.e., explicit claims or subtle messages. Our result indicates that the
direct claims are more persuasive than the subtle claims in a wide range of the parameter space.
However, when both formats are effective, deceptions with subtle claims are more profitable to
the firm because consumers will have less incentive to conduct the verification. Finally, we found
that the presence of an independent information source does reduce the firm’s incentive to make
deceptive claims, but it is most influential when the firm has a moderate reputation.
Keyword
Advertising
;
persuasion
;
consumer search
;
game theory
Understanding the patterns of demand evolution for a new innovation is critical for firms to effectively manage capacity planning, market and service operations, and research and development. The objective of this paper is to analyze how marketing at the industry level affects the evolution of primary demand in different stages of the product life cycle. We empirically analyze the growth and different types of marketing spending for product categories in the pharmaceutical industry across 7 countries. Our literature review leads to the identification of two constructs that characterize the pattern of competitive marketing spending over time: marketing breadth and competitive spread. The first construct reflects the spread of spending across different marketing instruments at the industry level, and the second construct reflects the spread of spending across different firms. Even though both construct measures a certain kind of spending spread, we find that they have qualitatively different (opposite) impact on market growth. An econometric model making use of the hierarchical nature of time observations within countries is estimated for each category. First, we find that high degrees of spending breadth impede market growth when the number of competitors is small (the category is young) but accelerate market growth when the number of competitors is higher (the category is maturing). Second, we find that high levels of competitive spread decrease category growth when spending levels are relatively low. However, as spending levels increase, the negative effect of competitive spread on demand growth all but evaporates.
Keyword
competitive spread
;
diffusion
;
marketing breadth
;
pharmaceutical industry
;
product life cycle
The objective of this paper is to better understand the factors that competitive news providers consider to design or deliver news programmes. The focus is broadcast news where, in any programming time period, a viewer watches (or consumes) one programme. We assume that each viewer is interested in a limited set of topics and that her utility only comes from the “most interesting” news she observes. The key questions we address are as follows: (a) Should firms adopt designs that facilitate the delivery of more information in their news programmes? (b) Does the decision of firms to implement such strategies depend on the complexity of the news programme (i.e., the number of news stories covered in the news product)? (c) How do such strategies influence competition? We show that firms may or may not benefit by providing better-designed news. The incentive to do this is strongly affected by the complexity of the news product and the intensity of competition between news providers.
Keyword
game theory
;
information processing
;
media competition
CNN, BBC or Fox? How do you decide? In order to better understand how competitive broadcast news providers can better attract and retain viewers, CEIBS Associate Professor of Marketing Xiang Yi has co-authored a research study that looks at how competition in the marketplace and the complexity of news stories interact to influence viewership.
