empirically distinguishing informative and prestige...
TRANSCRIPT
Introduction Data Model Results Conclusions
Empirically Distinguishing Informative and PrestigeEffects of Advertising
(Ackerberg, 2001 RAND)
Panagiotis Adamopoulos
Department of Information, Operations and Management SciencesStern School of Business, [email protected]
11/14/2011 - Industrial Organization (Ph.D.)
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
◮ How advertisements affect rational consumers who view them?
◮ Argument:◮ Advertisements that give consumers product information should
primarily affect consumers who have never tried the brand.◮ Advertisements that create prestige or image effects should affect
both inexperienced and experienced users.
◮ Techniques to empirically distinguish and measure differenteffects of brand advertising in nondurable, experience-goodsmarkets.
◮ Important implications for optimal advertising behavior.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
There are two different types of consumers:
◮ Inexperienced:◮ people who have never tried the brand or product, and
◮ Experienced:◮ those who have consumed the brand at some point in the past.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
There are three different types of advertising:◮ Information on product existence & search characteristics
◮ Informs consumers of a brand’s existence and searchcharacteristics.
◮ Such advertising will affect only consumers who do not alreadyknow of the brand’s existence or those search characteristics.
◮ Information on experience characteristics◮ Informs consumers about a brand’s experience characteristics.◮ Consumers who have consumed the brand more times should
know more about these characteristics and be less affected.
◮ Prestige and image effects◮ Directly affect the utility a consumer derives from consuming the
brand (either increase or decrease).
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
The data
Publicly1 available consumer-level panel data on yogurt purchasesand television advertising exposures to empirically examine theprevious arguments.
◮ 2000 households
◮ “Scanner data”
◮ Two geographic markets
◮ Three years (1986-1988)
◮ Weekly prices
◮ Household TV advertising exposures
◮ Newly introduced brand (Yoplait 150)
1A.C. Nielson dataEmpirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Why Yoplait 150?
◮ Short shelf life (no stockpiling behavior)
◮ Newly introduced brand (no experienced consumers)◮ Broadly advertised
◮ Competitors
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Quantity and Price Series
Figure: Time Series.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Advertising Series
Figure: Advertising Series.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Results from regression
Figure: Results from regression.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
The empirical model
Reduced form of discrete choice model:
cit =
{
1 iff Xitβ1 − γpit + ε1it > Zitβ2 + ε2it
0 otherwise,
where cit , indicates whether consumer i purchased Yoplait 150 onshopping trip t .
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Econometric results
Parameter Simple Logit Normal Random EffectAdvertising*Inexperienced (1) 2.04073 2.30566
(.723113) (.77561)
Advertising*Experienced (2) .90371 .43304(Image & Prestige Effects) (.63504) (1.21180)
(1) - (2) 1.13702 1.87262(Informative Effects)
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Econometric results (2)
◮ An additional 30-second commercial every week for the averageinexperienced consumer has the same effect to the purchaseprobability as a 10-cent price decrease.
◮ Advertising elasticity of demand for Yoplait 150 is around .15.
◮ The marginal effect of advertising is going down as a consumer’snumber of previous purchases increases.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Introduction Data Model Results Conclusions
Conclusions
◮ Yoplait 150 advertisements were influencing consumer behaviorprimarily by informing them about search and experiencecharacteristics, not by creating prestige or associating theproduct with favorable images.
◮ This approach can fairly easily be applied to other products orindustries.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Appendix
Summary Statistics
Figure: Summary Statistics.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Appendix
Number of Shopping Trip
Figure: Number of Shopping Trips.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Appendix
Purchases
Figure: Purchases.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Appendix
Explanatory Variable Descriptive Statistics
Figure: Explanatory Variable Descriptive Statistics.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos
Appendix
Endogeneity Problem
A consumer has a high initial intercept because she saw anadvertisement or simply because she happened to like the brandYoplait already?
◮ Instrumental Variable: of Mean advertising intensity.
Empirically Distinguishing Informative and Prestige Effects of Advertising Panagiotis Adamopoulos