Effects of local and national advertising across brands: the case of yogurt in China

Abstract

This study examines Chinese consumer's demand for yogurt and evaluates the effect of advertising on yogurt demand in four first‐tier cities in China. An almost ideal demand system augmented with advertising is estimated, and advertising on local media channels is distinguished from that on national media channels. The main findings are that Chinese demand for yogurt is generally elastic, yet local brands tend to have smallest own‐price elasticities. More importantly, while local advertising has generally a positive effect on yogurt demand, national advertising is found to decrease demand in Beijing and Guangzhou. This may be due to households' distinct media preference across cities, as well as advertising cannibalisation within brand. Lastly, advertising one yogurt brand may function similarly as generic advertising in promoting demand for yogurt with other brands. Corresponding marketing implications are drawn for yogurt manufacturers and marketers.