Issues in Advertising: The Economics of Persuasion

By David G. Tuerck | Go to book overview

The results from Table 5 might be translated as follows into the language of marketing strategy. Within an industry, large firms make use of the cost effectiveness of network television, while small firms are pushed to local newspapers. Firms with high BRANDS or BREADS seem to be following a strategy of pursuing multiple market segments, whether they be geographic or product based. The firms segmenting their markets avoid network television, with its common messages beamed nationwide, in favor of spot television or magazines where messages may be better tuned to the target segments. The spot TV advertising messages themselves as well as the brand names advertised can differ by geographic area, and magazines can be selected with the target audience in mind. Innovating firms use electronic media to stress the dominant theme of newness and choose network television to take advantage of economies in repeating this common theme nationwide. Thus the media have differing capabilities for information transmittal which show themselves in tandem with their cost differences.


Conclusion

In view of the limited degrees of freedom and the confinement of attention to a single industry, my results can be taken only as exploratory. These qualifications aside, however, it does appear that the level and composition of firm advertising varies systematically among firms within industries. This variation seems to be consistent with the hypothesis that the firm's marketing strategy variables, of which advertising is one, are simultaneously determined. In addition, the evidence on variations in media composition is consistent with differences among media in their effective threshold levels of outlay and in their flexibility in addressing different advertising themes.

The results support the complex view of the firm's optimal advertising level presented in earlier sections. Translated into an interindustry context, they suggest that controls for the full array of firms' decision variables will be necessary to permit isolating the influence of individual decision variables. This proposition pertains not only to advertising, but also to pricing behavior and the determination of product quality and rates of outlay for research and development as well; and thus the concept of simultaneous strategy determination has wider significance for research in industrial organization.

Finally, it is hoped that the use of methodologies focusing within an industry will be stimulated by this study. Such methodologies can often prove to be a powerful way of studying individual firm behavior and avoiding the difficulties of controlling for industry variables. The

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Issues in Advertising: The Economics of Persuasion
Table of contents

Table of contents

  • Title Page iii
  • Major Contributors v
  • Contents ix
  • Introduction 1
  • Acknowledgments 11
  • Part One Issues in Regulation 13
  • Advertising and Legal Theory 15
  • Advertising Regulation and the Consumer Movement 27
  • Commentaries 45
  • Part Two Advertising and the Firm 69
  • Towards a Theory of the Economics of Advertising 71
  • Introduction 71
  • Optimal Advertising: An Intra-Industry Approach 91
  • Conclusion 111
  • Technical Appendix 112
  • Commentaries 115
  • Part Three Advertising as Information 131
  • Advertising as Information Once More 133
  • Appendix A: Derivation of the Relationship Between a and P 156
  • Appendix B: Data Sources 158
  • Advertising, Information, and Product Differentiation 184
  • Commentaries 193
  • Four Part Advertising, Concentration, and Profits 215
  • Advertising Intensity and Industrial Concentration- an Empirical Inquiry, 1947-1967 217
  • Conclusions 249
  • Advertising and Oligopoly: Correlations in Search of Understanding 253
  • Appendix A 262
  • Appendix B 263
  • Commentaries 267
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