Advertising decisions: Which product, where and when?

摘要

While advertising is known to increase sales, firms have limited advertising budgets for a given financial period. When projecting financial performance and planning for advertising, an accurate assessment of the impact of advertising is important so that managers can allocate their budgets to maximize the return on each advertising dollar. In particular, the managers need to understand the impact of advertising over different products, different media types, and different time periods. That is, which products to advertise, which media to select when the products are advertised, and the times when the products should be advertised. I attempt to answer these important questions by developing a simultaneous model to measure the impact of advertising on product sales using weekly ticket sales data and to capture managers' decision on advertising over above mentioned dimensions using the data on advertising budgeting allocation for two seasons of shows at a performing arts center.To model the ticket sales, I use a duration model. Although previous studies in marketing use duration models to capture consumer demand over time, it has not considered managers' strategic behavior. For example, it is quite likely that the managers set the advertising timing and budget based on expected market response. That is, advertising decisions are endogenous to the overall demand system. To account for this possible problem, I jointly model demand and a set of advertising budget allocation decisions: which product, where, and when.In the context of advertising, few extant studies in marketing have tried to address the endogeneity issue in light of the managers' strategic behaviors. However, these studies are only related to one of the many decision dimensions that pertain to advertising. They did not provide complete implications and prescriptions for managers regarding product, media, and time level decisions. I extend previous studies by providing practical recommendations in terms of the product (which product), media (where) and time (when) level dimensions by incorporating both the demand side (consumers' response to advertising) and the supply side (advertising budget allocation decisions). It demonstrates the applicability of the proposed modeling framework by carefully linking it to the return on advertising.