Advertising Effectiveness, Brand Switching and Market Dynamics

Abstract

ADVERTISING can be used to create an experimental market environment. It can keep consumer brand purchase decisions fluid. In a sense it is and can be used to influence potential customers to keep an open mind and to seek out as time goes by the ever improved products and brands. Brand preferences play an extremely significant role in the dynamical aspects of marketing activity. Business men who have sought to use the power of advertising to create new markets and to sustain old ones have always required better ways to measure the effectiveness of advertising and promotional activity. In the following article a new method for studying advertising effects will be presented. It differs from other methods in that it takes into account measures of the strengths of competitors. The basic indicator of competitive strength and weakness is a brand switching, loyalty index. A person may have strong or weak brand preferences. He may always buy a given brand of razor blades, of soap, of margarine, of automobile, of coffee or he may switch from one brand to another either in some describable patterned way or in some haphazard way. Groups of persons can be similarly regarded. For example, at a given time it may be presumed that the current users of a given brand have in their minds to stay loyal or to switch to some other brand the next time that they intend to buy. By combining quantitative facts about brand preference with some fairly simple probability mathematics it is possible to develop ways to study Market Dynamics. Brand preferences can be directly influenced by advertising activity in the short run. Sales can be 'pulsed'; special promotions do have an effect. Linking together brand preferences and advertising activity with proper field experimentation it is possible to get estimates of advertising effectiveness. In the following article two major discussions will be developed, in a narrative form. The method employed will be that of numerical illustration for reasons of ease of understanding.2 The first illustration will refer to a set of experimental situations in which the problem is